can I write off cost of home improvements?
December 8, 2010 by Homes Redo
Filed under home improvements
My home needs a new roof and I was also thinking of upgrading both bathrooms in my house. I really dont want a loan so I am considering taking money from my 401k and I am aware of the tax implications. Does the IRS allow the cost of home improvements such as what I am looking to do to be written on on my tax return?
No, and don’t take a loan from your 401k — Let that money continue to build for retirement. Get a home equity loan or something. That interest you’ll be able to deduct on your taxes.
If its really a loan from your 401k you won’t pay taxes on it.
The only benefit you’ll get is that the cost of the improvements will increase the basis on your house- so when you sell, you’ll like have less exposure to cap. gains.
You can write off part of the cost for insulation and a metal roof. See the attached.
http://www.irs.gov/newsroom/article/0,,id=154657,00.html
The only other way I know about is when you sell the home, you can add the cost of home improvements to your cost basis. That way there’s less profit to pay taxes on. You’ll only need to do this if you don’t qualify for the rollover exemption.
Don’t draw from or borrow from a 401k until you hit 59-1/2. Go to the bank and take out a loan. there are a variety of reasons to do so.
Interest is deductible, Generally you can borrow at rates between 6-9% on a Home improvement loan, where as if you “remove” money from a 401k you pay the gooberment your going tax rate plus an early withdrawal penalty.
There are some adustments for energy conservation as well, if you add insulation, new furnace, Water Heater you may want to check the line items when you are doing your taxes.
No, they’re your personal expenses and not deductible. You might be able to add them to the basis of your house though, to save taxes if any are due when you sell it.