When you sell the property, if your home's selling price is more than what you spent to procure it, the extra amount will be considered taxable income. You can add the improvement cost to your property's value to reduce this taxable income. This can help you save money in taxes following the sale. • Home office deduction. If you are self-employed and work your home's selling price from home, the amount of space in your home dedicated to business activities is tax deductible. This deduction will include loan interest, insurance payments, utilities, repairs, and more. However, with the TCJA going into effect for 2018 - 2025, people not filing as self-employed are ineligible for the deduction. There are other specific guidelines for taking advantage of this deduction, so check with your professional tax preparer before filing. • Home energy tax credits. The IRS continues to incentivize homeowners who invest in eco-friendly home improvements. Homeowners can claim the Energy Efficient Home Improvement Credit, which applies to upgrades like exterior doors, windows, insulation, and HVAC systems. From 2023 through 2032, this credit allows for 30% of the total improvement cost annually, up to a maximum of $1,200 annually. Additionally, the Residential Clean Energy Credit covers solar, wind, geothermal power, solar water heaters, fuel cells, and battery storage, offering a 30% credit with no annual or lifetime limit until 2032. These credits, available for primary residences and second homes but not for non- residential properties, provide strong incentives for investing in energy efficiency and renewable energy.
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