You can spend your income tax refund on pretty much anything you like, but investing it back into your home in the form of the right renovations is the best use of the money. Improving your living space gives you immediate satisfaction and pays off in the long-run by making your home more valuable when you're ready to sell it. Choose the right home improvement projects to maximize the use of your tax refund this year.
Deductions for Next Year
Certain home improvements and renovations can be used as deductions on your annual federal taxes. For example, a renovation that makes a bathroom accessible for a disabled family member qualifies for being deducted from your tax amount, as does certain green energy upgrades. For other types of improvements that raise the home's value in general, the tax is deferred when you sell the house instead. Keeping track of what you spend on renovations, not repairs, is essential for minimizing capital gains taxes when selling, so don't let those receipts get lost.
The Most Valuable Improvements
Now that you know how to use renovations to your tax advantage, it's time to pick a few based on what your home needs the most. The list below includes some of the most valuable renovations when it comes to actually getting back what you've spent when you sell your home, so try to focus on these projects unless there's other specific repair needs or issues.
- Deck and porches, covered or not, recoup over 85% of their cost.
- New front doors, especially high-security steel or solid wood models, recoup over 95% of project cost.
- Attic remodeling that adds a new bathroom and bedroom to home recoup about 85% of costs.
- Medium sized kitchen remodeling, including floors and countertops but no major structural changes, recoup around 80% of what you spend.
- New windows, as long as they're insulated, fit well, and come with a warranty, offer you nearly 80% back.
- Better siding or improved roofing materials, especially when the existing materials are old and worn, recoup around 75% of the costs.
- Backup power system, either relying on batteries or a generator, yields a return of nearly 70%, with a higher value in areas prone to natural disasters or power loss.
Of course, who you choose to handle the renovations also plays a big role in how much you're getting out of spending your tax return on home improvements. Having the work done by the most qualified and experienced contractors ensures that the renovations maximize your home's value, and in some areas the name of the contractor alone can help sell your house. Choose Quality Craftsmen for your projects, whether they're big or small, to get the improvements you need to increase your home's value.