Latest news with #homeimprovements
Yahoo
21-05-2025
- Business
- Yahoo
What are cash-out refinance tax implications?
You won't owe taxes on the cash you receive from a cash-out refinance. If you use the cash to fund capital improvements on your home, the interest may be tax-deductible. Any mortgage interest you deduct is subject to IRS limits. A cash-out refinance lets you turn a portion of your home's equity into cash. You can then use the cash to fund anything from home improvements to college tuition or medical bills. In some cases, you may also be able to parlay your cash-out refinance into a tax break. Here's what you should know. No, the proceeds from your cash-out refinance are not taxable. The money you receive from your cash-out refinance is a loan you're taking out against your home's equity and which you'll pay back. Money received from a HELOC or a home equity loan is also not taxable. In addition to not paying income taxes on the proceeds, you might even be able to deduct some of the interest you pay on your cash-out refinance. If you plan to itemize deductions, you may be able to deduct the interest you pay on your new mortgage from your taxable income. But you must use the cashed-out funds to make what are known as 'capital improvements' to your home. Deduction-eligible home improvement projects generally increase the property's value, extend its longevity or adapt it for new uses. Consider consulting with a tax professional to ensure your projects qualify. You'll also have to save receipts and other paperwork associated with the improvements in order to receive the deduction at tax time. 'If you're using that money to increase the value of your home, and you get to write it off, it's a double benefit,' says Ralph DiBugnara, senior vice president of mortgage lender Cardinal Financial. The interest on your new mortgage is likely to be deductible if you use the cash-out proceeds for one of the following projects: Not all projects around your home will qualify as a capital improvement. For example, repairing a leaky faucet would be considered maintaining your property rather than enhancing it. A capital improvement, on the other hand, enhances your property. Examples include: Adding a swimming pool or hot tub to your backyard Constructing a new bedroom or bathroom Erecting a fence around your home Enhancing your roof to make it more effective in protecting against the elements Upgrading windows Setting up a central air conditioning or heating system Installing a home security system 'Capital improvements must substantially improve your home,' says Dennis Brager, founder of the Los Angeles-based Brager Tax Law Group. 'Kitchen and bathroom remodels, room additions, modifications for an elderly parent would all qualify. A standalone painting would not qualify; on the other hand, if it was just part of a larger remodel, then the cost of the paint job would qualify.' If you invest money from a cash-out refinance in capital improvements for your home, you may be able to reduce your capital gains tax liability when you sell it. You'll want to save all receipts for the work completed to prove how much you spent. Adding a home office is a popular type of capital improvement, and it sets you up to take the home office deduction if you're self-employed or own a business. However, you'll need to meet specific criteria to qualify for the home office deduction: Regular and exclusive usage. You must use the office space regularly and solely for business purposes, though you don't need to mark it off with a permanent partition. The office space cannot be used for personal reasons, such as a playroom or a guest bedroom. Principal place of business. Your trade or business can have more than one location. However, to claim the deduction, your home office must either be your main place of business or where you regularly conduct customer or client meetings. Note that employees who work from home don't qualify for this deduction. If you do qualify, though, there are two ways to calculate the home office deduction. The simplified option gives you a standard deduction of $5 per square foot of home you use for business purposes, up to 300 square feet. The regular method lets you deduct actual expenses based on the percentage of the home you use for business. Improvements and repairs to rental properties are typically tax-deductible — including when you fund them with money from a cash-out refinance. In this case, whether the projects maintain or improve the property — increasing its resale value or the rent you can charge — they qualify for the deduction. Learn more: 5 tax deductions for rental property Also called discount points, mortgage points are upfront fees you pay a lender in return for a lower interest rate on your loan. The full value of points typically isn't deductible in the year you paid them, whether with a regular mortgage or a cash-out refinance. However, you can take smaller deductions throughout the life of the loan. For example, if you paid $2,000 in mortgage points on a 15-year cash-out refinance, you can deduct about $133.33 per year for the duration of the loan. Learn more: Cash-out refinance rates A few limits apply to the interest you can deduct on a cash-out refinance. The current home mortgage interest deduction limit states that you can deduct interest on up to $750,000 worth of mortgage debt, or $375,000 if you're married filing separately. If you're married filing jointly, and your current mortgage balance totals $750,000 or more before the cash-out refinance, you won't be able to deduct the interest. Similarly, if your current mortgage balance is near $750,000, and your cash-out refinance puts you over the top, you'll be able to deduct only a portion of your interest. Keep in mind that if you purchased your home in 2017 or earlier, you may deduct interest paid on up to $1 million of mortgage debt, or $500,000 if married filing separately — but if you take out a cash-out refinance today, that interest is still subject to the current limits. You cannot deduct the interest on the entire new mortgage if you use the cash for anything other than capital improvements. So if you use the cash to, say, pay off credit card debt or buy a new car, you can deduct the interest only on the original mortgage balance. Let's say you have a mortgage with a $60,000 principal, and you want to take out $20,000 in equity through a cash-out refinance. If you use the cash to add a hot tub to your backyard, you can deduct the interest you paid on the total balance, or $80,000. If you use it to pay off your credit card debt, you can deduct only the interest you paid on your original balance, or $60,000. Even so, using a cash-out refinance to pay off credit card debt can be a smart financial decision. Most credit cards charge double-digit interest rates, while mortgage interest rates are hovering around 6 to 7 percent. There are many benefits to a cash-out refinance, but there are also notable drawbacks. These include: May qualify for more money than with other loan types May receive a lower rate than with other loan types Some uses are tax-deductible Stringent rules regarding tax deductions Larger mortgage balance Potential for a higher interest rate on mortgage Risk of foreclosure if payments aren't made Learn more: Pros and cons of a cash-out refinance A cash-out refinance isn't your only option for borrowing money. You might also consider a: Home equity loan: These fixed-rate loans leave your current mortgage in place, which may be an advantage if your rate is lower than what you could get on the current market. Home equity line of credit (HELOC): Similar to a home equity loan, a HELOC is a second mortgage, meaning you carry it in addition to your existing mortgage. HELOCs tend to have variable rates, which can increase or decrease over time. Personal loan: These loans tend to have higher interest rates and lower borrowing limits than loans secured by your home — but if you're at all concerned about your ability to make payments, this may be a safer option. Do I need to provide documentation or proof of how I used the cash from a cash-out refinance for tax purposes? If you plan to write off your mortgage interest, you'll need to save receipts and other paperwork related to capital projects to prove that the work completed on your home is eligible for a deduction. Consider filing with a tax professional to ensure you have the necessary proof. Can I deduct any closing costs or fees associated with a cash-out refinance on my taxes? You can deduct only certain closing costs related to a mortgage refinance on your taxes. While you can't deduct the cost of title insurance and appraisals, you may be able to deduct some or all of the interest paid and the cost you pay for points to get a lower interest rate. Sign in to access your portfolio
The Sun
13-05-2025
- Business
- The Sun
Top 12 home improvement jobs from that have FALLEN in price revealed from plumbing to tiling
THE cost of carrying out home improvements has fallen by as much as 34% in the last 12 months. Exclusive data from Checkatrade has revealed the 12 DIY jobs that have seen the biggest price falls - and the combined savings total almost £11,000. Falling building costs have made carrying out home improvements more affordable for homeowners, with the average cost of a job down 28%. The reductions follow several years of price rises caused by factors including increased material prices across the board. Builders and tradespeople were also impacted by supply chain disruptions, which created scarcity and drove up prices further. Add to this inflation, energy costs and labour shortages and consumers had got used to receiving eye-watering quotes since 2020. However, data shows that prices have begun to fall and unsurprisingly the reduction in costs has seen a significant increase in those undertaking work on their homes in 2025. The biggest fall in prices has been seen in handyman services with the average cost of a job carried out in the first three months of 2025 34% cheaper than it was in 2024. The second largest reduction was seen in building work with the average price of a job falling by 28%, from £16,818 to £12,065. Other home improvements to have seen big price reductions include tiling (25%), electrical works (25%), scaffolding (22%) and windows doors and conservatories (22%). These were followed by bricklaying, which saw a 21% price decrease from an average of £3,165 in 2024 to £2,489 in 2025. Other jobs to have fallen include central heating work (18%), plumbing (17%) and groundworks (16%). Jambu Palaniappan, CEO at Checkatrade, said: 'After ongoing rising costs fuelled by Brexit and Covid, it's a welcome relief for consumers to see prices finally easing. "We've seen demand for some of the bigger home improvement jobs dip over the past year, and as demand has slowed, prices have followed – making it more affordable for people to get work done. "This drop in costs, combined with the usual seasonal uptick we see at the start of the year, has led to a big rise in certain types of home improvement projects recently, as consumers take advantage of better prices." Checkatrade has warned that the sudden reduction in price could leave consumers at risk of cowboys charging above market rates. So, the tradesperson platform has launched a Job Estimate Calculator to help people make informed decisions before appointing a contractor. The free-to-use tool draws on data from 1.5million jobs completed by the site's 50,000 vetted trade businesses to generate accurate quotes for projects. Many people have shared stories of cowboy builders with The Sun including a dad left almost bankrupt after sinking £120,000 on a nightmare loft conversion. A mum also told The Sun she had her life ruined after "cowboy builders" took nearly £200,000 for a home renovation. How to find a reliable trader Checkatrade and GoCompare have shared tips for spotting a cowboy. The warning signs: Someone who asks for a cash payment upfront A trader who refuses to draw up an official contract for work Doesn't offer written estimates including a timeline for completing the job Doesn't offer references from previous clients Say they work 'off the books' Anyone who knocks on your door and says they've noticed you need work doing Traders without an official premises or landline phone number Those who aren't a member of a reputable trade group, such as the Federation of Master Builders or the National Federation of Builders Their workforce keeps changing They repeatedly find further work that needs completing
Daily Mail
10-05-2025
- Business
- Daily Mail
Cost of major home building projects drops by up to 28%
Enquiries about 'big ticket' home improvements increased in the last quarter, according to new data from Checkatrade. While the quarter-on-quarter figures were strong, the year-on-year picture was, however, more mixed, the platform said. The number of households enquiring about getting a new bathroom fitted via trades on Checkatrade in the first quarter of 2025 increased by 17 per cent compared to the previous quarter. However, annually, bathroom fitting enquiries were down 9 per cent, the findings added. The data suggests enquiries for kitchen fittings jumped 11 per cent quarter-on-quarter, while queries about larger-scale work like extensions or structural modifications rose 17 per cent. Enquiries from households to the platform about Energy Performance Certificates reportedly surged 151 per cent year-on-year in the quarter, while demand for waste removal or cleaning services also rose sharply. According to Checkatrade's latest research, 'seasonal trends', falling prices and more people looking to sell their homes led to the upturn in the number of people looking to get certain major works done on their home in the first quarter. Its figures suggest the average cost of a building job in the quarter fell to £12,065, compared to £13,964 at the same point a year ago, representing a 14 per cent fall. Checkatrade said the average cost of kitchen fittings was down a fifth from £7,509 to £6,093. It added: 'These figures are corroborated by an annual fall in costs. For example, the cost of the average building job has fallen 28 per cent year-on-year, when comparing the first quarter of 2025 to the first quarter of 2024. 'Likewise, costs for kitchen fittings have fallen 14 per cent year-on-year and bricklaying costs are down 14 per cent. 'Meanwhile, electrician costs are down 24 per cent and plumbing costs are down 17 per cent year-on-year.' The group said enquiries about architectural services and home heating remained flat year-on-year. Checkatrade's Home Improvement Index analysed more than 10million job enquiries via its platform this year. Jambu Palaniappan, chief executive at Checkatrade, said: 'Our first Home Improvement Index of 2025 shows a good start for the home improvement and tradesperson industry. 'The strong increases since the last quarter show a positive trajectory for 2025. 'While we often see increases in Q1 due to seasonal trends, this could have been more muted this year due to many consumers taking a more cautious approach with their money when it comes to bigger spending. 'But a trend of falling prices on key jobs and a competitive selling season has helped ensure the market remains resilient and has led to a strong start to the year.' He added: 'Looking at the wider picture, year-on-year performance shows a more mixed perspective with some types of jobs up, others down, and others in line with this time last year.' In July 2024, Checkatrade said it had blocked a record 668 tradespeople who had failed its checks, representing a 13 per cent increase year-on-year. The company said its 12-point vetting process rejected applicants for failing to evidence documentation such as proof of identity and address, a poor trading history or negative online reviews. It said in July that roofing was the most challenging home improvement service, with roofers comprising 19 per cent of those turned away, followed by driveway companies and landscapers. Figures from the Department for Business, Energy & Industrial Strategy published in 2022 claimed unscrupulous traders cost homeowners approximately £1.4billion a year. Earlier this year, Palaniappan said the group had blocked more than 1,300 applicants from Checkatrade in 2024. How to find a new mortgage Borrowers who need a mortgage because their current fixed rate deal is ending, or they are buying a home, should explore their options as soon as possible. Quick mortgage finder links with This is Money's partner L&C > Mortgage rates calculator > Find the right mortgage for you What if I need to remortgage? Borrowers should compare rates, speak to a mortgage broker and be prepared to act. Homeowners can lock in to a new deal six to nine months in advance, often with no obligation to take it. Most mortgage deals allow fees to be added to the loan and only be charged when it is taken out. This means borrowers can secure a rate without paying expensive arrangement fees. Keep in mind that by doing this and not clearing the fee on completion, interest will be paid on the fee amount over the entire term of the loan, so this may not be the best option for everyone. What if I am buying a home? Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be. Buyers should avoid overstretching and be aware that house prices may fall, as higher mortgage rates limit people's borrowing ability and buying power. How to compare mortgage costs The best way to compare mortgage costs and find the right deal for you is to speak to a broker. This is Money has a long-standing partnership with fee-free broker L&C, to provide you with fee-free expert mortgage advice. Interested in seeing today's best mortgage rates? Use This is Money and L&Cs best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs. If you're ready to find your next mortgage, why not use L&C's online Mortgage Finder. It will search 1,000's of deals from more than 90 different lenders to discover the best deal for you. > Find your best mortgage deal with This is Money and L&C Be aware that rates can change quickly, however, and so if you need a mortgage or want to compare rates, speak to L&C as soon as possible, so they can help you find the right mortgage for you.
