Home improvement projects can increase the value of your property, and one of the ways to fund these is through a home improvement loan. Taking out a home improvement loan, however, means that you’ll have to pay interest. On the bright side, you can receive a tax deduction on your loan interest, depending on whether or not your project meets certain criteria.
Capital Improvements vs. Home Repairs
First, you need to determine whether the project that you’ll use the loan for is a capital improvement. To be considered one, the project has to meet the following criteria:
It is expected to last for more than a year.
It adds new functions, e.g., home office improvements for entrepreneurs.
It will increase the building’s lifespan and resale value.
Projects that don’t meet this criteria are classified as home repairs, which don’t qualify for a tax deduction; The key difference between a capital improvement and a home repair project is the former adds value to your building while the latter restores parts of your building to their original state.
Personal Loans for Home Improvement Projects
A roofing project that meets all of the above criteria and is financed by a loan with collateral like home equity loans is eligible for a tax deduction. If, however, the capital improvement was financed by an unsecured or personal loan, the interest from the loan isn’t eligible for a tax deduction.
Regardless of what type of loan you choose, we recommend you ask a financial consultant about your options. Some contractors that have partnerships with lending institutions also offer loans to their customers.
Hometown Contractors Roofing is a certified GAF Weather Stopper® contractor with more than 10 years’ worth of experience in the roofing industry. We offer commercial and residential roof replacement services. To get a free consultation, call (512) 686-0011, or fill out this form. We serve homeowners in Georgetown and Austin, TX.