Tax credit would help cover multigenerational home renovations

Individuals could claim a federal income tax credit equal to 15% of eligible renovation expenses. The $7,500 total cap would apply separately to each qualifying home and combine claims by spouses. The credit would begin shrinking when adjusted income for this credit exceeds $200,000 for most returns and $400,000 for joint returns; it would reach zero after another $75,000. For taxpayers at or below their area's median gross income, the credit would be refundable, meaning it could be paid even when it exceeds taxes owed. If the annual tax limit prevents use of part of the credit, that amount could carry forward for up to five following tax years. The credit would apply to tax years beginning after December 31, 2026. Its dollar limits would receive inflation adjustments for tax years beginning after December 31, 2027.

Eligible expenses would include physical items directly tied to the covered work, their on-site installation labor, and inspections required because of the installation. The home must be in the United States or a U.S. territory and be the taxpayer's main home or a second unit on the same property. A qualifying relative must be at least 65 or disabled, have a covered family relationship, live in a qualifying home for more than half the tax year, and have a taxpayer ID number listed on the return. For living-space work, the other person must provide care to the eligible taxpayer. An otherwise eligible expense would still qualify if the intended occupant moves in within one year after the work is completed. Taxpayers would have to provide the required proof of each expense. These eligibility rules would apply to tax years beginning after December 31, 2026.