Where do I enter info for a room addition - building expenses, insulation, etc

[DS30 · Accepted solution]

It depends.

Unfortunately there is no deduction for capital improvements to your personal residence or rental property.

However, you will be able to increase the cost basis in your house by the amount of these capital improvements.

For rental properties, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. Please refer to IRS - Rental Income and Expenses more information on rental income and expenses.

For a rental property, you would need to add the total cost of a room addition under the asset section (and claim a depreciation expense over the life of the rental property).

To enter rental income and expense, once you have signed into your TurboTax Account (for TurboTax Online sign-in, click Here , then select "Take Me to My Return"), type "sch e, rentals" in the search bar then select "jump to sch e, rentals".

For a personal residence -

There is also a credit and additional itemized deduction that might be available to you for these capital improvements to a personal residence.

Your home improvements may qualify you for a nonbusiness energy tax credit (depending on your specific tax situation)

Please refer to the energy tax credit for more information.

To see if you are eligible for a your home energy tax credit in TurboTax Online or Desktop, please follow these steps:

1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
2. Next click on “Deductions and credits”
3. Next click on "jump to full list" or “I’ll choose what I work on”
4. Scroll down the screen until to come to the section “Your Home”
5. Select - Home energy Credit and start. Let TurboTax guide you on entering this information.

Also you may be able to claim interest as an itemized deduction if you financed this home improvement.

A qualifying loan is one that is taken out to add "capital improvements" to your home, meaning the improvement must increase your home's value, adapt it to new uses, or extend its life. Examples of capital improvements are: adding a third bedroom, adding a garage, installing insulation, landscaping and more.

Include this home improvement interest expense under the same section as you would Home Mortgage Interest.

To enter your Mortgage Interest in TurboTax Online or Desktop, please follow these steps:

1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
2. Next click on “Deductions and Credits”
3. Next click on "jump to full list" or “I’ll choose what I work on”
4. Scroll down the screen until to come to the section “Your Home”
5. Choose "show more", then Mortgage Interest, Refinancing and Insurance

It is OK to show your home improvement interest expense as mortgage interest under the 1098 section of Schedule A. Just keep a copy of your loan information with your tax records, so if you are contacted by the IRS, you will just need to provide an explanation of your situation (that your additional mortgage interest is related to a home improvement loan and provide the IRS with the details of this loan).

Additionally, if you are claiming a sales tax deduction in your home state, you can include the sales tax paid on building materials as a major purchase under this section.

A few things to remember about this major purchase deduction, you will only get this extra deduction if:

• The sales tax rate on this major purchase needs to be the less than or same rate as your state's general sales tax rate.
• You are taking the state's sales tax deduction as opposed to the state's income tax deduction.
• You itemize on your return.

To enter this transaction in TurboTax, log into your tax return (for TurboTax Online sign-in, click Here and click on "Take me to my return") type "Sales Tax Deduction" in the search bar then select "jump to Sales Tax Deduction". TurboTax will guide you in entering this information.

To enter your sales taxes and major purchases in TurboTax Online or Desktop, please follow these steps:

1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
2. Next click on “Deductions & Credits”
3. Next click on "jump to full list" or “I’ll choose what I work on”
4. Scroll down the screen until to come to the section “Estimates and Other Taxes Paid ”
5. Choose "show more", then Sales Tax (start/update/revisit)
6. Choose - continue to sales tax and choose "Easy Guide"
7. If your state sales tax information is already entered you will need to edit it to enter your major purchases information.
8. On the screen that says Major Purchase - select "yes"
9. Enter your building material information and sales tax here on the next screen.