Are Home Improvements Tax-Deductible?
Home improvements are a common way to enhance your living space and add value to your home. In fact, homeowners are expected to spend $466 billion annually on home improvements and repairs through the second quarter of 2025, according to the Joint Center for Housing Studies of Harvard University’s Leading Indicator of Remodeling Activity (LIRA). But are home improvements tax-deductible? Generally, the answer is no. However, there are certain exceptions that can help eligible homeowners save on their taxes.
Key takeaways
- The majority of home improvement projects don’t qualify for tax breaks.
- You may lower your tax bill by making substantial improvements that boost your home’s value or prolong its use.
- Medically necessary home improvements, like entrance and exit ramps, might be tax-deductible.
What home improvements are tax-deductible?
Most cosmetic home improvements, including interior and exterior painting, installing new flooring and fixing leaks, generally aren’t tax-deductible. However, if your project is considered a “capital improvement” by the Internal Revenue Service (IRS), it might have tax advantages. A capital improvement can be defined as a home improvement project that:
- Boosts your home’s value
- Prolongs its use
- Adapts it to new uses
Qualifying home improvements typically can’t be claimed as deductions in the same year the expenses occur. Instead, the costs are often added to your home’s cost basis, which can help reduce the taxable gain when you sell your home.
What home improvements are tax-deductible when selling?
You can reduce your tax bill when selling your home by adding the cost of home improvements to your home’s cost basis. For example, if you purchased your home for $300,000 and made $30,000 worth of improvements, your new cost basis would be $330,000. If you sell the home for $400,000, your estimated taxable gain would fall from $100,000 ($400,000 – $300,000) to $70,000 ($400,000 – $330,000).
Here are examples of home improvements that may help you save money on your taxes:
Medically necessary home improvements
Generally speaking, medical-related home improvements for you, your spouse or your dependent are tax-deductible. For example, you can deduct the costs of installing entrance ramps and modifying bathrooms for accessibility as medical expenses. You can only utilize this deduction if you itemize your taxes.
Other tax-deductible medical home improvements may include:
→ Widening interior hallways and doorways
→ Installing railings or support bars
→ Lowering kitchen cabinets
→ Modifying fire alarms and other warning systems
→ Moving electrical outlets and fixtures
→ Installing a porch lift
Home office upgrades
If you run a full-time or part-time business from your home, you may be able to deduct certain qualifying home office expenses. To receive this deduction, your home must be your primary place of business, and you must use a specific area of your home exclusively for business purposes.
For example, if you’re a self-employed accountant who uses your living room to prepare financial statements and call clients, but also uses the living room for recreation, you wouldn’t be eligible for the home office tax deduction, since the space isn’t used exclusively for your business.
Examples of home office improvements that may be tax-deductible include:
→ Painting expenses only in the area you use for business
→ Percentage of general repair costs only in the area you use for business
Energy-efficient upgrades
Some homeowners may qualify for tax breaks when they make energy-efficient improvements to their home. The energy efficient home improvement credit equals 30% of qualified expenses, including:
→ Qualified energy-efficiency improvements installed during the year
→ Residential energy property expenses
→ Home energy audits
The maximum credit you can claim per year is $3,200, and there’s no lifetime dollar limit.
Improvements vs. repairs
In real estate, an improvement is anything that adds to the home’s value, adapts it to a new use or substantially prolongs its life. On the other hand, repairs are generally minor fixes that keep your home up to date.
| Improvements | Repairs |
|---|---|
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How to claim home improvement tax deductions
- Determine your eligibility: You’ll first need to determine if your home improvements qualify for a tax break. Eligibility requirements and thresholds change often, so it’s important to check the IRS website or ask your tax advisor for the most up-to-date information.
- Gather documents: It’s important to keep detailed records of your home improvement expenses, including itemized receipts, invoices and other documents related to the improvements. It’s generally recommended to keep the documents for as long as you own your home, plus a minimum of three years after filing your tax return for the year of the sale.
- Complete the necessary forms: For most home improvement deductions, you’ll need to itemize your taxes on the Schedule A section of your tax return. Depending on the type of improvement, you’ll need to fill out additional forms. For example, to claim the home energy credit, you’ll need to complete IRS Form 5695.
Additional tax breaks for homeowners
Mortgage interest tax deduction
If you itemize on your tax return, you can deduct your mortgage interest payments, typically up to the first $750,000 of your loan’s principal balance. You should receive IRS Form 1098 from your mortgage lender, which details the interest you paid during the year, as long as you made at least $600 in total interest payments.
Property tax deduction
Homeowners can deduct up to $10,000 worth of property tax payments, depending on their filing status. The deduction for single taxpayers and those who are married filing jointly is $10,000, while the deduction for those married filing separately is $5,000. Similar to the mortgage interest deduction, the property tax break is only available if you itemize on your tax return.
Historic home tax credit
If you’re renovating a historic home, you may qualify for the federal historic rehabilitation tax credit, which is equal to 20% of the qualified rehabilitation expenses. Examples of historic home renovations that might qualify for the credit include updating the plumbing and heating systems.
Home equity loan interest deduction
You might be able to deduct the interest paid on your home equity loan if it was used to buy, build or substantially improve your home. However, if you used a portion of the home equity loan for everyday expenses or debt consolidation, the interest on those expenses isn’t tax-deductible.
Learn more about how much you could borrow using a home equity loan calculator.
Frequently asked questions
Generally speaking, improvements to a rental property, including remodeling a bathroom or adding a garage, aren’t tax-deductible. However, these expenses might be depreciable over the useful life of the property, meaning you can deduct the costs over a number of years (typically anywhere from three to 27.5 years).
Remodeling a bathroom isn’t tax-deductible for most homeowners. However, if you need to renovate your bathroom for medical reasons, such as adding handrails in the shower, you may be able to deduct the improvement as a medical expense.
Like most home improvement projects, new flooring generally isn’t tax-deductible for a primary residence. However, you may be able to deduct certain flooring costs for a rental property.
Painting a house typically isn’t tax-deductible because it doesn’t fall under the IRS’ capital improvements definition. One potential exception is if you need to repaint your home due to damage caused by a natural disaster.