When planning a roofing replacement project, you may be missing out on a significant amount of savings if your project is eligible for tax deductions and you don’t take advantage of them. In this blog, Coleman Roofing takes a look at how to determine your eligibility for tax deductions based on home improvements.
Two Conditions for Claiming a Tax Deduction
Generally speaking, there are two conditions that you must meet for your home improvement loan to qualify for a tax deduction. The first is that you must own the home and live in it. This means your name must clearly be stated as the borrower, and that the home improvement loan must be secured for the property the project will be improved on.
Secondly, your project must substantially improve your property by it adapting for a new use or extending its long-term usefulness. This means routine maintenance and repairs do not count. On the other hand, a roof replacement project conducted by a certified roofer does count.
Records You Should Keep Track Of
You need to prove that you qualify for a tax deduction. The following are some of the records you need to keep:
- Loan Contract — Also known as the loan agreement. This is the agreement that you signed when you got the home improvement loan.
- Escrow closing statements — This is a document prepared at the close of escrow, documenting the charges and credits made to your account. Your closing papers should include a statement that reflects the financial aspects of your transaction.
- Receipts for Work Done — This includes the original quote, and the receipts for all payments you’ve made, from downpayment to the final payment.
- Form 1098 — This is also known as the Mortgage Interest Statement, and is filed with the IRS (Internal Revenue Service). It details all interest and related expenses paid on a mortgage during the tax year, which can be used as deductions on an Income Tax Form.
Remember to send copies of these documents and keep the originals. You may also make digital copies as a safety copy.