Kitchen Remodeing & Your Taxes

Wondering if remodeling your kitchen this year will help or hurt your tax bill come early next year? This great article, “Q and A: How does kitchen remodel figure into taxes?” will explain it all!

By: Claudia Buck, McClatchy Newspapers

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With Tax Day less than a month away, plenty of taxpayers are puzzling over IRS forms. This week, IRS expert Jesse Weller answers tax questions about kitchen remodels and same-sex marriages.

QUESTION: We paid off our home mortgage in 2005. Last month we started a big kitchen remodel and opened a home equity line of credit with our credit union. Is the interest that we pay on the home equity tax-deductible, as long as we only use it on kitchen remodeling expenses (and save all our receipts as proof)?

ANSWER: It sounds like you can deduct your interest on the home equity line of credit.

Generally, taxpayers can deduct qualified home mortgage interest if they itemize deductions on Form 1040, Schedule A, and the mortgage is a secured debt on their main home or a second home they own. A mortgage taken out after Oct. 13, 1987, where the money is used to buy, build or improve a qualified home, is known as “home acquisition debt.”

On a qualified mortgage of $1 million or less ($500,000 or less if married filing separately), the interest paid usually qualifies for a deduction.

In most cases, taxpayers can deduct all of their home mortgage interest, but there are limits. The deduction amount depends on the mortgage date, amount and how the proceeds are used.

On a home equity debt, even if the proceeds are not used for a home improvement, an interest deduction may be allowed up to $100,000 ($50,000 if married filing separately).

For more information, visit http://www.irs.gov/ and download Publication 936, Home Mortgage Interest Deduction. Or order a copy by calling 800-TAX-FORM (829-3676).

Read more here!

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