Make the Most of Your Remodel
We recommend speaking with a tax professional in your area before starting any home renovations. It’s much easier to be prepared ahead of time. Specifically, it’s better to keep track of your expenses as you incur them than to have to think back at tax time. You don’t want to be tracking down receipts that might be long gone.
Another professional you might consider consulting is a realtor. Even if you’re not thinking of selling your home, it’s a good idea to see what other houses comparable to your own property have in terms of upgrades. You might find inspiration in what has been done to these properties. Or you might find out what to avoid when completing your own improvement project.
The most common improvements to make include updating kitchen cabinets, adding rooms or bathrooms, and replacing doors and windows. According to TaxAct, “for a mid-range kitchen remodel, you’ll recoup about 57 percent of the cost. For a mid-range bath remodel, you’ll recoup about 70 percent of the cost.” A realtor will know what upgrades will garner you the most profit when it does come time to sell your home. They can advise you where your money will be best spent.
You should also know that opting for tax deductions will likely require you to itemize your deductions. Claiming the deductions you’re eligible for is only worth the effort if all of your itemized deductions exceed the IRS standard deduction. That number is $12,400 for 2020 for individuals, and twice that for married couples. Keep that in mind as you tally up your expenses and prepare your taxes.