Are water filtration systems tax deductible?

The pandemic remodeling craze has pushed consumer remodeling costs through the roof. With the tax season beckoning, lots of homeowners are now wondering how much of their remodeling costs are eligible for tax write-offs.

What is the T2201 Form?

This is a federal Disability Tax Credit Certificate that will allow you (the taxpayer) to write off that home water purification system, but only if a couple of conditions are met. The T2201 form is applicable to those who have used medications that have a negative reaction to impurities that linger within tap water, in return, changing the outcome of the medication. Common illnesses that fall within this category include psoriasis, eczema, and CPAP machine users.

Benefits of Having a Water Filtration System Installed in Your Home

  • Save Money – If you have been buying bottled water, then the costs can quickly add up. Let’s say you go through 2-3 bottles of water each day, every day. That may not seem like a lot of money, but this can add up to an annual cost of $500, depending on the brand of water you buy. Even if you do not qualify to have the water filtration system be tax-deductible, just installing a water filtration system will save you a lot of money in the long run.
  • Always have Safe Drinking Water – You shouldn’t have to deal with having unsafe drinking water in your home and if you don’t already have a water filtration system installed, chances are, your water isn’t safe. Pollutants such as heavy metals and pathogens are commonly found in water, and this can cause health problems.
  • Help Preserve our Environment – plastic bottles are a major part of plastic waste. Even if you properly dispose of your plastic bottles, there is no guarantee that the bottle is going to be recycled. By eliminating those plastic water bottles from your daily usage, you will be doing your part in correcting this problem.
  • Prevent Skin Irritation – When you have sensitive skin or a condition such as psoriasis or eczema, suffering from exposure to those chemicals that are in water like chlorine can cause skin irritation. Having a water filtration system installed in your home can help alleviate such problems. Even if you’re not suffering from these conditions, it’s nice knowing you’re bathing in pure, clean water when you’re in the shower.

Here is a link to a buying guide that explains the different types of water filtration systems that you can use at home.

How do capital improvements work?

The cost of that new roof or a new shower isn’t going to directly increase your taxes. There are dated federal IRS codes that gave home sellers the opportunity to deduct their home improvement expenses, like painting the house, fixing broken windows, and planting flowers. However, this tax break is no longer in existence.

While you’re not able to write off home improvements as an item on your tax return, there are certain renovations that will qualify for what is known as “capital improvements. Capital improvements can prevent you from having to pay more in capital gains when you decide to sell your home. So, even if you don’t plan on selling your home during the previous tax year, make sure you keep track of those receipts if you make a major improvement.

When you sell real estate, the government is going to want a piece of those profits. However, when you file taxes as an individual, there’s an incentive that can exclude up to $250,000 of profit on the sale. As long as you have lived in the home and have owned it for at least two years, then you can qualify for this. When you file a joint return, this can exclude up to $500,000 of that gain.

Renovations for Medical Purposes

When someone in your home required renovations of your house due to medical purposes, then you will have the opportunity to write it off on your taxes. When filing, these improvements would fall under medical expenses and not home improvement expenses.

Conclusion

So if you were wondering whether or not water filtration systems were tax-deductible, well, the answer is yes but only if you can provide evidence that you installed the filter for medical reasons. That said, you still get to save a lot of money that you would have spent on bottled water so in the grand scheme of things, installing a water filtration system is a great way of saving money.