Yusra3
VIP Contributor
Home improvement and renovation projects can be expensive, prompting many homeowners to take out loans to finance the costs. An important consideration is whether the interest paid on these home improvement loans is tax deductible.
In most cases, the interest on a dedicated home improvement loan used for renovations like a new roof, kitchen remodel, or addition is not tax deductible. This is because the loan proceeds were not used to purchase, build, or substantially improve the home itself.
However, if you instead did a cash-out refinance of your mortgage or took out a home equity loan, the interest paid on that portion of the loan used for eligible home improvements may qualify for a tax deduction. This only applies for interest on loan amounts up to $750,000.
To maximize tax benefits, maintain careful records detailing the loan purpose and renovation project costs. Also ensure the improvements materially increase your home's value - repairs alone do not qualify. Consulting a tax professional is advisable to properly claim any eligible deductions.
In most cases, the interest on a dedicated home improvement loan used for renovations like a new roof, kitchen remodel, or addition is not tax deductible. This is because the loan proceeds were not used to purchase, build, or substantially improve the home itself.
However, if you instead did a cash-out refinance of your mortgage or took out a home equity loan, the interest paid on that portion of the loan used for eligible home improvements may qualify for a tax deduction. This only applies for interest on loan amounts up to $750,000.
To maximize tax benefits, maintain careful records detailing the loan purpose and renovation project costs. Also ensure the improvements materially increase your home's value - repairs alone do not qualify. Consulting a tax professional is advisable to properly claim any eligible deductions.
