Builders and remodelers who help homeowners retrofit their properties to be more accessible should be aware of a new tax credit that can offset the cost of upgrades for those homeowners. The Home Modification Tax Credit program was officially launched on Jan. 1, and helps homeowners cover the cost of retrofitting existing homes to make them more accessible for people with illnesses or disabilities, or to allow them to age in place.
“The ability to live independently in your home is a priority for many Coloradans, and we are happy to be able to provide a program that incentivizes those who are making their homes more accessible and self-sufficient,” Alison George, division director for the Department of Local Affairs’ Division of Housing, said in a statement announcing the program launch.
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Homeowners or residents with up to $150,000 adjusted family income can claim the cost of the updates up to $5,000 on their state income taxes. Up to $1 million in credits will be issued per year until 2023. The Division of Housing will issue credit certificates to eligible individuals until the $1 million limit is met for the calendar year.
The credit is only available for upgrades on existing homes, not accessibility designs that will be built with new construction.
Furthermore, eligible homes must be the primary residence of the qualified individual, although that person doesn’t have to be the homeowner (to be clear, they must have the homeowner’s permission to make any modifications to the home). However, DOLA notes that families with a dependent who is the only person who needs the modifications also aren’t eligible to claim the credit.
That’s due to a statutory regulation in the Home Modification Tax Credit bill, HB18-1267, which created the program and was enacted in May 2018, according to Natriece Bryant, chief administrative officer for DOLA.
However, Bryant told Colorado Builder, “if there are extenuating circumstances, that’s why we have the three-pronged application process.”
Coloradans who want to claim the credit need to file a pre-qualification survey to determine whether they and their home are eligible; an initial application before work begins with the proposed modifications; and a final application detailing the completed project.
“They would submit [an application] first and state the upgrade or the change they want to make to the property … . If we determine it would be a qualifying factor, we take it on a case-by-case basis,” Bryant explained. “We are looking at every single case.”
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Other eligibility requirements include:
- Only homes in Colorado will be eligible.
- Modifications must be necessary to ensure the health, welfare and safety of the resident with an illness or disability, and to allow more independence or accessibility.
- Modifications must be completed in the same tax year in which the credit will be claimed, although qualified individuals may make claims for additional upgrades in subsequent years.
- Upgrades must increase the residence’s visitability.
A home’s visitability, Bryant explained, means ensuring that modifications don’t impede another residence.
“It’s more for accessibility,” she said. “We don’t want people making upgrades that no longer make that residence accessible to others. For example, if the primary residence is a condo and they add a ramp in their area, it can’t impede an entrance to another person’s home.”
Eligible upgrades may include building ramps, modifying bathrooms or kitchens, installing grab bars or widening doorways. DOLA notes that although the cost of durable medical equipment that is not installed or affixed to the home isn’t eligible for the credit, installing specialized electric and plumbing systems that can accommodate medically necessary equipment is an eligible expense.
Bryant encouraged Coloradans to get the word out about the program.
“We want to be able to spend the $1 million that we get,” she said. “If the money sits, we can’t justify the need for it, so we want to make sure that taxpayers are aware of the fact that they can apply for” the credit.
Danielle Andrus was previously the managing editor for Colorado Builder, and is currently Editor for the Journal of Financial Planning.