Tax Season! Home Improvement Edition.

Item’s to keep in mind while filing this year’s taxes or planning 2018 tax season. 

1.Energy Efficiency such as solar

The only federal tax credits for energy efficiency improvements are for solar energy systems such as solar panels or solar water heaters. However, these do expire in 2021. Ask your installer & manufacturer regarding the necessary items to apply, because documentation is necessary for the 30% tax credit of cost .

Notes: The energy taken in must be used for your HOME! You won’t qualify if you’re installing solar panels to that fancy new hot tub. 

2.Insulation Tax Deduction
Tax Credit Amount:  10% of the cost, up to $500! The credit applies towards the cost of the material and won’t apply towards the installation/labor. The qualifying insulation is not limited towards a special brand or manufacturer. You can install blown-in, batt, spray foam, or weather stripping, however remember the manufacturer certification sheet
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3. Home sales exemption
It’s common for qualified sellers to not pay capital gains if there main residence accrued a profit of a quarter of million (single) or $500,000 big ones for those that file married jointly! Many will use this exemption by completing home renovations so they can reduce the amount of sale price being used as a profit! If you wanting to beat the IRS this might be a great way to avoid those capital gains altogether.
Remember to keep a handy accountant within a phone call or use the interwebz.
4. Do you rent out a section of your home?
Much like a home office space, you can write off the cost of repairs to your rental property and then depreciate improvements. That’s pretty basic, and cool enough. But consider that if you rent out a portion of your own home, it works like the home office deduction. You can write off the cost of “your” home repair if it’s in the rental area, and you can write off improvements for the percentage of the space used for renting.
5. Moving into that new home?
The best home improvement decision is often buying a brand new house! Whether you’re forced to move for a job or another situation, you can write off the cost the big move! Whether you’re moving into that beautiful dream house or that flipper you finished restoring.
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Other tips;
  • Consult an accountant or tax pro? Such as you’re local tax guy.
  • Do you’re own research: turbotax is a great software program.
  • Another great site: Motleyfool.com  
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What’s the best % to budget for emergency maintenance?

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Recently, a lot of our client’s have asked us about planning emergency maintenance budget’s and were curious on how to better stretch their HOA dollar’s. We will gladly tackle this question, because it’s important for property manager’s, maintenance divisions, and homeowner’s. Our definition of a emergency maintenance budget:  Item’s, which typically are not a concern or an ongoing issue for an individual, organization. This budget would help you fix emergency leaking, falling siding, etc.

For Condominiums/townhouses

Checklist items to have access to:

  • Running inventory of the age of exterior products (siding, windows, roofing, etc)
  • List of recent renovations & their contractor’s (along with warranties)
  • Yearly HOA receivables & yearly vendor bills (lawn care, tree’s, garbage).

These item’s will represent what must be completed every year to maintain your complex as is and now you see the product’s that are on the “best side” of a worst to best condition list. So now your board can focus a larger  % of receivables on the “worst side” such as those $25,000 + renovation project’s. Yet, where does this leave the maintenance budget? Our rule of thumb is 5% (low-end) to 15% (high-end) should be planned for emergency repairs or an escrow account. We understand not all repairs are the responsiblity of a property management company and might be the homeowners, but this doesn’t mean the funds will be wasted. A number of management companies we know will apply any unused fund to those larger renovation project’s or leave in an escrow account in case of an insurance claim (deductible)

The problem we found with condominium’s and committee board’s is the number of individual’s involved. A lot of the “wish list” renovation’s are decided by vote from designated committee members, which does speed up renovations. However if it’s possible, we recommend gathering insight from the on-site maintenance person or previous vendor’s during your review. We don’t suggest taking their vote as part of the decision (Constitutional bylaws), but take their advice with merit. These serviceman generally know your complexes extremely well and they’ll be honest to you, because there’s always problems throughout the complex. The input of the vendors/serviceman may shift your committee’s desire to replace that wood siding instead of installing a new pond liner.

The best part of having a 5 to 15% safety net you can afford an expert or reputable companies. Often organization’s will be tight on their budget, which lead’s them to hiring the unqualified contractor for 1/2 the cost of the local vendor. We understand every governing community is different in what’s important to them, but it will never hurt you to have 5 to 15% planned yearly.

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Homeowner’s

If you’re a homeowner then consider asking your “jack of all trades” neighbor, a licensed contractor, or call a licensed home inspector. Start these discussion’s off with “what item’s do you believe are my worst to best?”

Cost of these services:

  • Neighbor – Case of beer or a favor
  • Home Inspector – A scale fee based on how many items are reviewed
  • Contractor – Cost of your time (Often Free Estimates)

 

The amount we advise budgeting for a family or property owner is 2 to 5% of the property value. This recommended number is far less than townhouse/condo complexes (5 to 15%) due to their sheer size and # of issues. It’s far more common for condominium board’s to spend $100,000 on lawn maintenance than a homeowner to spend the equivalent. In addition, homeowners are not paying HOA fees and they have complete control over the repairs/vendors. The biggest reason this 2 to 5% is key, because A LOT of insurance providers are changing their policy holders to deductibles of 1 to 3% of their property value, which puts you in the driver seat of the ultimate emergency. We advise applying the unused amount in an insurance deductible escrow account or transfer it to your next big home remodel (HVAC, roofing, windows, etc.)

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Sharpen those no. 2 pencils, it’s tax time.

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We’re neither accountants nor tax advisors, but we have been serving the construction industry for over 30+ years. A LOT of things have changed in the tax world since 1985, but we’ve heard enough feedback from our clients over the years to share with YOU the most important tax considerations. The information may be helpful or merely a refresher for you. However, we believe the more educated you are as a homeowner the better position you’ll be in to save some money. These are the top four tax items we suggest you reviewing:

  1. Mortgage Interest.

The greatest part about a home loan is the home. Face it not many of us look forward to that monthly mortgage bill. Home lenders will alway’s state “well you can’t write off the mortgage interest” and you SHOULD. There are varying policies and requirements when it comes to a refinancing loan on a cash paid property, $1 million caps, and more tax rules, so we advise you to do your homework before writing anything off.

    2. Home Improvement Loan Interest

We understand owning a home and having a family is an expensive feat within today’s economy. Maybe your finances were affected by the housing bubble, job market, or merely bad luck, it’s ok. So a lot of people utilize a Home Improvement Loan. The great news about this loan is the loan interest is tax deductible!! There’s no upper dollar limit, but the project must increase your home’s value and prolong its life. Examples: A new roof, pool, garage, porches, insulation, HVAC, landscaping, and more. We strongly advise you to reconsider increasing the square footage of your home, unless you’re prepared for possible reassessment (higher property taxes).

 

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Home Improvement loans can help you increase your home’s value!

 

 

    3. Property Taxes 

We’ve known about these since our day’s playing Monopoly. Your city or state property taxes can be deducted from income. Keep in mind that city or state property taxes refund reduces your federal deduction by a like amount.

   4. Home business

Do you run an ETSY store or EBAY shop? As long as use a portion of your home exclusively for business purposes, you may be able to recoup certain home costs. We do recommend making sure your homeowner’s insurance policy will cover your house if you do have a home business (double check). A great video showcasing this was in the movie “The Accountant” here’s the scene.

 

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Brand new Royal Building Products Siding (Schererville, Indiana)