10 Tax Breaks for the Home, Room by Room
Your home is where the refund is. Whether they are home office deductions, tax credits for new purchases, renovations, or "green" tax incentives, Uncle Sam is able to help you recoup some of your expenses you've put into your home.
That is, provided you have all the receipts, manufacturer's certificates and other required paperwork for any deduction or credit you plan to claim on your tax return.
Homeowners have lots to wade through to determine what all they might juggle when it comes to tax planning. To make tax preparation easier, we have outlined the following tips to help homeowners navigate tax season this year.
You can deduct lawn maintenance if you fit the "business use" test, says Bay Area tax expert Gary Price, of accounting firm Sensiba San Flippo (ssfllp.com).Lawn Care
Lawn care and landscaping expenses are deductible if the taxpayer's client's regularly visit the home office, or where the lawn is used as part of the business, as in a daycare provider with children going out on the lawn for play area. Yes, this even applies to snow removal. Use form 8829.
If you primarily work from home, you should be able to deduct a percentage of your mortgage interest, real estate taxes, casualty losses, home repairs and maintenance, utilities, house insurance, security system and even garbage removal based on the square footage of your home office space compared to the overall square footage of your home.Business Use of a Home
"In order to qualify as a home office in the eyes of the IRS," says tax attorney Roni Deutch, CEO of the Roni Deutch Tax Center, "you need to have a separate room or designated space that is used exclusively for business purposes. If it is not a room, then the space needs to be separated by a room divider of some sort. Additionally, the IRS is very strict about the exclusive use rule, so if your children play in the office or your spouse uses the room as a home gym then it will not qualify."
Use IRS Form 8829 if you are self-employed. Download Publication 587 for IRS rules. And if turned an old bedroom into an office space using California Closets or other remodeling project, you should be able to deduct that expense too for work, if you itemize.
Did an adult child, other relative or friend move in with you after a job or home loss or for another reason? If so, and you've been charging them rent, you can deduct a portion of their living space, says CPA Brenda Schafer, CFP, from the Tax Institute at H&R Block in Kansas City, MO.Renting Out a Room
"Depreciation is allowed only for areas used exclusively by the renter, such as a bedroom and separate bathroom. If total allowed deductions exceed the rental income, a loss is generally allowed up to certain limitations."
If you converted a basement, attic, garage or other space into rental quarters, Uncle Sam gives you a break on the remodeling costs.Rental Conversion
"Converting a basement to a separate rental unit is treated as a "regular" rental. Mostly, that means that depreciation on the rental portion of the home is allowed. Expenses to remodel the basement would be added to the depreciable basis of the basement of the house and would be depreciated," Schafer told HousingWatch.
Windows, storm windows, certain fuel stoves, doors, and storm doors, all qualify, says John Egan. "The neat thing about the credit is that you could replace just a few windows in your home or even put a window in an area of your home where there is not one." Perhaps put a skylight in the kitchen.Home Improvements
"A very simple skylight can give a whole new look to a kitchen or family room and get a big discount," he says. File form 5695 with your tax return.
Even replacing your window shades or adding a window film to the glass can get you a tax credit. Duette Architella shades by Hunter Douglas (previous picture) qualify for the tax credit, as does Panorama solar control window film (pictured).Window Coverings
Homeowners can receive a 30 percent credit on the cost of qualifying window coverings, up to $1,500. Installation costs do not apply. This tax credit applies only to improvements made to a primary residence from Jan. 1, 2009 through Dec. 31, 2010. Complete IRS form 5695.
Qualified biomass stoves and furnaces heat a home or water by burning biomass fuel, such as corn, cherry pits, wood pellets, plants and fibers. The tax credit covers the product and in some cases the installation, which is a good thing because the larger products are not cheap.Biomass Stoves
The inexpensive models can cost $700, but the larger units go for $4,000 or more. The Harman PC45 Corn/Pellet Stove (pictured) runs about $3,500, a spokesperson for the company told AOL Real Estate. Installation fees can add another $500. Some biomass fireplace inserts, which are heating units that retrofit into an existing fireplaces, might qualify for the tax credit.
Energy-saving home upgrades also qualify for tax deductions, says John Egan, a certified financial planner with JM Egan Wealth Advisors in Madison, NJ. "The government-sponsored energy credit is the easiest one to qualify for and the most practical one to get tremendous savings on needed home improvements," he told AOL Real Estate.Energy Savers
"It can only be used in your primary residence and offers 30% as a tax credit up to $1,500,. That's a dollar-for-dollar credit as long as you have some income tax of at least $1,500. That means you can get a 30% savings on a $5,000 home improvement." From lightbulbs to spray-on insulation like Icynene that helps cut down on air leakage, there are many products and upgrades that qualify, helping you increase energy efficiency. Some other products have no max on the credit and for some you can even carry forward the tax credit over several years until 2016.
Adding on a new reflective roof could qualify you for a tax deduction if you choose the right product, reports the Metal Roofing Alliance. Asphalt roofs with appropriate cooling granules meet the requirements, as do metal roofs with certain pigmented coatings.New Roof
Metal roofs can resemble slate, shake and tile, such as the one pictured of an Allmet Roofing Products. If your house is shaded and the roof is not exposed to much sun, or your attic is well insulated, this might not be the product for you.
Thanks to the Residential Energy Efficient Property Credit, seriously "green" homeowners that have installed alternative energy equipment, such as solar hot water heaters and geothermal heat pumps and wind turbines, can be eligible for a credit up to 30 percent of the cost of equipment and the installation, with no cap, except on fuel cells.Alternative Energy Users
Buyers of small wind turbines, including vertical axis ones made by Helix Wind (pictured), can claim a credit through 2012 provided installation began in 2009 or 2010.
More tax advice on AOL Real Estate