income. You can add the improvement cost to the value of your property to reduce the amount of this taxable income. This can help you save money in taxes following the sale. • Home office deduction. If you are self-employed and work from home, the amount of space in your home that’s dedicated towards 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 rewards homeowners who make efforts to create eco-friendly homes. Solar is particularly lucrative, as installing a solar power system or solar hot water system earned you a 30% federal tax credit before 2019 ended. After 2019 the credit fell by a few percentage points each year, down to 26% through 2022. The credit is 22% for 2023 after which it is set to expire. Unfortunately, a large amount of other federal energy efficiency credits expired in 2016, but that doesn’t mean you should give up on being eco-friendly: there are still many state and local tax credits, incentives, and rebates on offer for upgrading your home’s energy efficiency.
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