When you are looking for a home in a sellers market your challenge will be not just finding a home you like, but also beating out all the other homebuyers who like it and want to make an offer on,
Home Improvements That Add Value To Your Home When You Sell
This isn’t something you’ll see the benefits of until you’re ready to sell your house, but any home improvement can end up saving you on taxes by increasing your real estate “basis,” which is the total amount of money you’ve spent on your house—purchase price included.
Let’s say you and your significant other bought a house last year for $700,000, then did $100,000 worth of eligible improvements. Your basis in the house is now $800,000. If you sell in 10 years for $1.3 million, your tax-eligible profit from the sale would be $500,000 (rather than $600,000 had you done no home improvements).
So how does this help you taxwise? Whenever you decide to sell your home, you’ll have to pay, capital gains tax on any profits beyond $250,000 per individual, or $500,000 as a married couple. So in the example above, had you and your partner neglected to factor the $100,000 in home improvements into your basis, you’d be paying taxes on any profits above that $500,000 mark, or in this case $100,000.
Factor in those home improvements, however, and your profit—$500,000—remains all yours, tax-free. That’s a great deal, so save those receipts! Here are a few examples of renovations that could pay you back come tax time:
Renovating a kitchen or bathroom
Building an addition
Replacing windows and doors
Replacing your roof
Putting in a new HVAC system
Finishing a basement
Adding a wet bar
Adding a deck or hot tub
Just keep in mind: It has to be a home improvement that adds value to your home. So, repairs don’t count, because they merely restore a home to its original state by fixing something that was broken or looked run-down.
Interest from home-improvement loans
In the same way that the interest portion of your mortgage payments is tax- deductible, the interest from a secured home improvement loan or HELOC is deductible if you use the money for a renovation.The IRS has a handy flowchart to help you see if your loan qualifies. You can deduct up to $100,000 in interest, and any kind of home improvements are eligible. So if you take out a $50,000 home equity loan at 7% interest to build your dream kitchen, you’re looking at a $3,157 deduction in the first year.
*Always check with your CPA*