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Home purchase and tax deductions

I am purchasing a home in a few weeks. I am looking into tax write offs for replacement doors, pellet stove and perhaps solar panels and a small home office.  Since I would not own the home for the full tax year, can I still claim these on my filing? Thank you 

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5 Replies

Home purchase and tax deductions

Yes you can but they are not "write offs" so much as credits or an office in home deduction if you are self employed with a profit. 

Home purchase and tax deductions

The time owned doesn't matter.  And some expenses you add to the cost basis of your house when you sell.  So you might need to keep track of them.

Home purchase and tax deductions

So lets's separate this out.

 

You never get tax breaks for repairs.  Repairs keep the property as-is or restore damage to as-was and are the responsibility of every responsible home owner.

 

Improvements add to the value of the home or extend it's useful life.  Improvements add to the cost basis of the home and may reduce your capital gains when you sell, but are not immediate tax deductions.

 

Certain energy-saving improvements are eligible for tax credits. The "Nonbusiness energy property credit" is 10% of the cost of insulation, efficient doors and windows, and efficient furnace, heat pump, hot water heater, air conditioner, or pellet stove.  There is a lifetime maximum of $500, and some other limitations.  This credit expired at the end of 2021, so it's not available any longer unless Congress renews it.

 

The Residential energy efficient property credit is currently 26% of the cost of certain renewable energy generating capabilities, like solar, wind or geothermal.  The credit is claimed when the property is placed in service (installed, inspected and turned on).   It doesn't matter if you did not own the property for the entire year. 

 

You can't deduct home office expenses for a W-2 job.  You can deduct a home office for self-employment if it is your regular place of business and you use that portion of your home exclusively for work, and not for personal purposes.  When you take the home office deduction, you can deduct a percentage of your household expenses such as utilities and insurance.  You can't deduct your mortgage payment, but you deduct depreciation, which is wear and tear on the property caused by business use.  If you make home improvements that benefit the entire house, you can depreciate the percentage of the improvement that applies to your home office percentage.  If you make an improvement that applies only to the home office, you can depreciate the entire cost of the improvement.   If you only use the home office for part of the year, you pro-rate the deductible expenses (for example, if the home office is 15% of the total space and you start using it in October, you can deduct 15% of your utilities and other home expenses for the months of October, November and December.)

Carl
Level 15

Home purchase and tax deductions

replacement doors, pellet stove

Repairs are not deductible. Period. Nothing further to discuss on that, because we can talk about it all day. It doesn't change the fact that the IRS says repairs and maintenance expenses  to personal use property (such as your primary residence) are not deductible.

Property improvements simply add to the cost basis of your property. They are not claimed or reported anywhere on any tax return, until the tax year one of three things happens in your life.

1) You sell the property.

2) You convert the property to some type of business use, such as a rental.

3) You die.

 

and perhaps solar panels

Another property improvement that adds to the cost basis of the property. However, it may qualify for an energy credit on your tax return for the tax year the solar panels are installed and placed "in service". I'm not sure, but I think you have to reduce your cost basis by the amount of credit taken.

 

and a small home office.

Be aware that expenses for a W-2 job are no longer deductible. This includes a home office. If you are self-employed, then claiming a home office on the SCH C is allowed and not a big deal.

Home purchase and tax deductions

@Carl 

@fireman1333 

Even though doors would normally be a repair, there was a 10% tax credit for installing energy efficient doors (meeting a minimum insulation value).  But that credit expired.

 

Yes, if you get any credits for solar panels (including the federal tax credit, state tax credit, or utility company incentives) you must reduce your cost basis.  

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