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Make The Most Of Your Home Improvement Tax Benefits Using These 6 Tips Prestige Partners Realty Team - Monday, April 24, 2017
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Home ownership offers some really valuable financial benefits, particularly when it comes to taxes. But understanding how they work (and when they kick in) is key to maximizing their value. Read on for the six things you'll want to keep in mind come April 15.


TAX BENEFITS DO NOT ALWAYS EQUAL TAX DEDUCTIONS OR TAX CREDITS.


1. Let’s review the basics. Your total annual income is your taxable income and based on that number, you will fall into a certain “tax bracket.” Your tax bracket determines your tax liability (a.k.a your tax bill). Tax credits directly reduce your tax bill (which is why they are better); tax deductions on the other hand bring down your taxable income. The most common tax credits are related to First time home buyer, expenses related to child care and home offices.


2. Tax deductions on the other hand lower your taxable income to an amount equal to your marginal tax bracket. For example, if you are in the 25% tax bracket, a $1,000 deduction saves you $250 in tax (0.25 x $1,000 = $250).


LET’S BETTER UNDERSTAND HOME IMPROVEMENT TAX BENEFITS.


3. First, the bad news: Home improvements to your primary place of residence are not “deductible,” though they do offer tax value when you sell your home. When you sell your home and make a profit — and we hope you do — the IRS will tax the difference between what you paid, known as the basis, and the sale price or the “profit.”


4. When you make home improvements, it increases your “basis,” and essentially reduces the amount of taxes you pay on the profit. If you bought your home for $100,000 (“basis”), for instance, and you made $50,000 worth of home improvements then sell it for $250,000, you pay taxes on $100,00 (“profit”).


Read the full article published on ELLE Decor:

Read All 6 Tips


WEICHERT, REALTORS® - Prestige Partners has over 25 years of experience in the real estate industry. Our agents specialize in real estate sales, property marketing, commercial leasing, and investing. Utilizing innovative technology, we are able to conduct market research and create business strategies that consistently achieve results for our clients.