Refinancing Tax Time And Home Improvement Deductions

What follows is NOT tax advice. For information on refinancing loans, tax deductions, and information presented in this article, discuss your needs and wants with a tax professional.

A recent article on a website titled, HomeImprovementFactory.com advises borrowers to invest in energy-efficient home improvements to save money at tax time by taking deductions on those improvements.

The blog post, “11 Home Improvements You Can Claim On Your Taxes and Save Money” argues that there are tax breaks to be had by investing in solar heaters, adding skylights, installing biomass stoves and other modifications.

The tax rules for such deductions are subject to change from year to year, so we won’t comment on whether these types of energy efficient improvements are deductible for the current tax season.

But what you should definitely know is that there is an FHA home loan program that allows borrowers to include the cost of adding approved energy efficient alterations to the home into the new purchase loan or refinancing loan.

The type of energy efficient items to be installed are regulated and must result in a tangible benefit for the home owner. FHA loan rules say that an energy expert may be required to determine the effectiveness of the proposed home improvements and how they will result in greater energy savings.

The FHA Energy Efficient Mortgage loan (EEM) permits borrowers to add up to six thousand dollars into the loan amount for approved EEM additions. Are these upgrades and improvements tax deductible this year. That depends on current tax code and the nature of the deductions in question.

But the bottom line for most borrowers is that these changes to the home can and should result in lower utility bills, regardless of the tax implications. And that’s the real incentive for most borrowers to consider an FHA EEM--a more efficient home means better savings, which add up over the lifetime of the home and the loan.

FHA EEMs are available, as mentioned previously, for both refinance loans and new purchase home loans. Ask your loan officer today about the EEM option and how you should go about applying for it.

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