Unfortunately there is no deduction for capital
improvements to your personal residence.
However, you
will be able to increase
the cost basis in your home by the amount of these capital improvements.
There
is also a credit and additional itemized deduction that might be available to
you for these capital improvements:
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:
- Once
you are in your tax return, click on the “Federal Taxes” tab ("Personal"
tab in TurboTax Home & Business)
- Next click on “Deductions
and credits”
- Next click on "jump to
full list" or “I’ll choose what I work on”
- Scroll down the screen until
to come to the section “Your Home”
- 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:
- Once you are in your tax
return, click on the “Federal Taxes” tab ("Personal" tab in
TurboTax Home & Business)
- Next click on “Deductions and
Credits”
- Next click on "jump to
full list" or “I’ll choose what I work on”
- Scroll down the screen until
to come to the section “Your Home”
- 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:
- Once
you are in your tax return, click on the “Federal Taxes” tab ("Personal"
tab in TurboTax Home & Business)
- Next click on “Deductions
& Credits”
- Next click on "jump to
full list" or “I’ll choose what I work on”
- Scroll down the screen until
to come to the section “Estimates and Other Taxes Paid ”
- Choose "show more",
then Sales Tax (start/update/revisit)
- Choose - continue to sales
tax and choose "Easy Guide"
- If your state sales tax
information is already entered you will need to edit it to enter your
major purchases information.
- On the screen that says
Major Purchase - select "yes"
- Enter your building material
information and sales tax here on the next screen.
