Owner/Builder Tax and Tax Credits
Hey all,
I am an owner/builder getting ready to break ground. I want to have my ducks in a row come tax time, and be able to take advantage of any tax credits that might be coming my way.
In my research, however, it seems that I can’t take advantage of heat pump (i will have a heat pump water heater as well) tax credits because I am neither building the house for a client, nor is it existing construction receiving an energy upgrade. So, I think I am in a grey area where I dont qualify for the credits through the IRA. Can someone confirm this?
Also, I will save my receipts for the labor and materials. Can someone explain to me exactly why I am doing this? I am pretty sure that I can’t write any of this off (I am a contractor) but I might need to know how much I spent building the house because……??
Thanks for any help you can offer on these questions.
Stephen
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Replies
When you go to sell the house you'll need to know how much you spent to calculate capital gains.
If you ever want to take out a mortgage the bank will want to know how much you spent as a sanity check on the appraisal.
You save your receipts to
a. Calculate your tax basis in the house to limit your capital gains costs
b. Calculate your actual cost (you want to know this for reasons other than tax basis don't you?)
c. Warranty issues - fans, dampers, etc. break. You need the receipts for warranty claims.
To take advantage of the efficiency tax credits, you may want to look into transferring the property to your business, building the house as your business, then buying it from your business for your personal use. This depends upon the cost of transfer taxes in your jurisdiction. Where transfer taxes are low, this can be worth it.
Another strategy without transferring is to prep for the equipment you really want, but install old equipment such as an older electric WH. The calendar year following the year you move in, upgrade it all and take advantage of the tax credits such as installing a HP water heater, etc.
Those are interesting ideas. The second one seems like more of a possibility in my case. Thanks very much.
If you own a home currently purchase the HP water heater for that house.......and instead install in new home.
I have 2 friends who got a great rebate right up front from lowes and home depot when they purchased it. They could have installed it anywhere. The both live in MA.
As for saving receipts for labor and materials, it's a good practice for several reasons. Firstly, it helps you keep track of your expenses, which can be useful for budgeting and future reference. Secondly, if you ever plan to sell the house, having a record of your construction costs may be beneficial for tax purposes or potential buyers. However, to be sure about any tax deductions or write-offs, it's wise to consult a tax professional who can guide you based on your specific circumstances. Websites like https://credithubcapital.sg/personal-loan-singapore/ may provide insights on personal loans. But always ensure you read the terms and conditions thoroughly before making any decisions.