Federal Remodel Incentive Programs and Tax Relief Options
Do you want to get a refund the next time you remodel your home?
There is a variety of different local, state, and Federal remodel incentive programs that can help you improve the value of your home.
There is also a range of tax relief options and low-interest loans you can take advantage of, but many of them are difficult to find.
Table of Contents
What are the Basic Requirements?
The programs offered by the government are limited to things that increase the value of your home. They specifically exclude luxuries, such as home spas and outdoor kitchens. To be eligible, you need to follow a few key rules to claim a Federal remodel tax credit.
Future Renovations Only – These incentives don’t apply to any past renovations. You should apply to these programs before you start the project.
Limited Remodels – Most of these programs are only there to support basic changes that would enhance your property value. For example, some programs won’t support replacing your roof, but they will support upgrading your roof with a superior material.
Oversight is Necessary – During your project, you must submit to at least one inspection. There will be plans in place to schedule the start of the project and when the inspection will take place.
Have You Considered Property Tax Exemptions?
Property taxes can make up a huge part of owning a home in some states. Property taxes may amount to thousands of dollars per year.
If you’re eligible to join a property tax exemption program, it means that you’ll be exempt from paying local property taxes in part or in full for the duration of your project.
The issue with providing eligibility requirements is that they can differ between every town and every county. Typically, if you’re the owner of a single property, you can qualify. You must also make sure that the property is owner-occupied, in most cases.
Most counties don’t itemize which home improvements qualify. Instead, they are opting for broad categories. You need to do your research in your local area to find out more about what qualifies.
Take note that property tax exemptions are only temporary, according to state laws. Your main point of contact will be administrators and tax assessors in your town or county.
Home Improvement Programs (HIPs)
HIPs are a type of program that provides low-interest or no-interest rate loans to homeowners who want to make improvements to their homes.
The idea behind them is to help you save thousands of dollars because your local government is subsidizing the interest on your loan. Depending on the loan you qualify for, you may have part of your interest or all your interest subsidized.
There are lots of different eligibility rules, but the main rules are that you need to be remodeling an existing building, your gross income must be below a set limit, and you can’t be using the money to install luxury items.
Keep in mind that not every part of the US will have HIPs available. Those that do will have county tax assessors to handle the loan. Only occasionally are private lenders used for home equity loans. Even if this does happen to you, the county is continuing to subsidize it.
You May Be Eligible for FHA Rehab Loans
The formal name for an FHA rehab loan is an FHA 203(k) Rehab Loan Program.
The way they work when you buy a home that needs remodeling is that your mortgage will only cover the cost of the house itself. Any remodeling must be paid for out of your own pocket. This can mean long waiting times and high-interest rates just to bring your home up to the required standard.
An FHA rehab loan is essentially the US government guaranteeing your loan, so lenders are better able to lend with confidence.
Requirements for these loans vary considerably. Some of them only include renovations up to a limit, whereas others allow you to demolish the home and rebuild.
There’s a lot of bureaucracy when it comes to applying for these loans – especially because you’re dealing with the US Department of Housing and Urban Development – so it’s wise to hire someone to help you out.
Federal Tax Deductions for Home Improvements
Remodeling of your house is not usually a cost that can be deducted from your federal income taxes. However, there are many techniques that you can utilize for home remodeling and upgrades to decrease your taxes.
This includes both tax breaks and tax incentives for remodeling and enhancements made to your house, either when you bought the home or after.
Keep in mind, H&R Block online will help you claim every remodel tax deduction and credit that you are eligible for, like those linked to renovating your house.
How to File Taxes Online Using H&R Block
|When you file with H&R Block Online they will search over 350 tax deductions and credits to find every tax break you qualify for so you get your maximum refund, guaranteed.|