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If you’re looking to catch a break on your taxes, you could find relief under your very own roof. Some home improvements qualify as tax deductions, especially if they meet the IRS definition of “capital improvements.”
If that sounds tricky, don’t sweat it. We’ll walk you through the rules so you know exactly what home improvements are tax deductible and which ones aren’t so you can save with Uncle Sam while sprucing up your property.
In this article:
Yes, remodeling a home can be a tax deduction. Before you leap with joy through your living room skylight, here’s what you need to know: The IRS has strict rules on the types of home improvements that qualify for a tax write-off.
Generally, you can’t write off home repairs — general fixer-upper tasks like a fresh coat of paint or updating all the doorknobs on your bedroom doors. While these to-dos can refresh the look and feel of your home, they qualify as general maintenance and preserve or restore your home to its baseline.
Now, for the good news: You could score a tax deduction when you make improvements beyond simple repairs. The IRS calls these types of renovations “capital improvements.”
The IRS defines capital improvements to a property as those that meet one of three criteria:
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Adds long-lasting value to your home
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Meaningfully extends your home’s useful life
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Adapts your home to a new use
These types of renovations increase the cost basis of your home — its baseline value. For example, a coat of paint looks great but doesn’t materially change your home’s market value. On the other hand, adding an accessory dwelling unit (ADU) can substantially change your home’s market value when you go to sell. See the difference?
Now, let’s discuss this in more detail so you can easily identify the home improvements that offer the best chance of future tax savings.
Dig deeper: Want to build an ADU or in-law suite? Here’s how to finance it.
Now, it’s time to jump through the skylight — many home improvements qualify as capital improvements. Here are some examples:
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Room remodels. Kitchen and bathroom glow-ups are some of the most popular.
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Home additions. A permitted garage, carport, in-law wing, deck, or ADU can increase a home’s value.
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Landscaping. New patios, hardscaping, and property-wide permanent landscaping can boost value and curb appeal.
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Major interior upgrades. Flooring, fireplaces, and fresh insulation can add value.
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Structural improvements. A new roof, windows, or siding fall into this category.
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System improvements. Heating, cooling, and plumbing systems may qualify.
That’s a pretty nifty list of tax-deductible home improvements, right? While most of these improvements don’t come cheap, they can all add to your home’s value, life, and functionality for years to come. However, they aren’t the only transformations that can help you earn a tax bill break.
Learn more: How much is your house worth? How to determine your home value.
All kidding aside, here’s where the IRS shines: It offers taxpayers a range of tax deductions and credits for various property enhancements that may fall outside the capital improvements above.
If you, a spouse, or a loved one living with you requires physical changes to your home due to a disability, those expenses could be tax deductible. Some common medical additions that qualify under IRS guidelines include support bars, ramps at your home’s entrances and exits, widening doorways and hallways, and installing lift equipment to accommodate a disability.
You’ll need to itemize your tax deductions to claim these expenses. To be deductible, medical expenses must exceed 7.5% of your adjusted gross income (AGI).
Dig deeper: Standardized deduction vs. itemized — how to decide which tax filing approach is right
If you use part of your home exclusively for work and improve that space, you could qualify to deduct those costs on your taxes. The IRS’s rules on home office deductions are strict, and you can only write off the proportion of house-wide improvements that directly apply to your dedicated office space. For instance, if you repair your roof for $10,000 but only use 10% of your home’s square footage as your home office, your max deduction would be $1,000.
Our advice is to consult with a tax professional to ensure that your planned improvements to your home office meet IRS guidelines. If you want some (not-so) light reading, you can also explore IRS Publication 587, Business Use of Your Home.
Read more: Who can claim a home office tax deduction?
If you have a rental property at your primary residence, you could recoup some of the annual repair and maintenance costs through depreciation when filing your taxes. Since rental income can be tricky, we recommend working with a tax pro to keep you on the right side of the IRS when figuring out the deductibility of any rental property improvements or expenses.
Using a home equity line of credit (HELOC), home equity loan, cash-out refinance, or a renovation loan like the FHA 203(k) loan to make home improvements could translate to tax savings. With these loan products, you may qualify to deduct the interest on your taxes when using the money to pay for IRS-qualifying capital improvements.
Dig deeper: Mortgage interest tax deduction — how it works and when it makes sense
You may be eligible for a yearly tax credit of up to $3,200 if you make energy-efficient improvements to your primary residence. Credits include:
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Up to $1,200 annually for costs and improvements, including up to two exterior doors ($250 each), windows and skylights ($600 total), and home energy audits ($150 total).
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Up to $2,000 annually for qualifying water heaters and heat pumps.
Improvements must have been made in 2023 or later and credits extend through the 2033 tax year. Keep in mind that these are technically tax credits — not deductions — so they work a little differently.
Learn more: Tax credit vs. tax deduction — what’s the difference, and which is better?
You could claim the Residential Clean Energy Credit if you install qualifying clean energy equipment at your primary residence between 2022 and 2032. With this nonrefundable credit, you can claim 30% of the improvement cost for things including but not limited to solar panels and water heaters, wind turbines, fuel cells, and geothermal heat pumps. The equipment installed must be new. You can use IRS Form 5695 to claim the credit. Again, remember that this tax benefit comes in the form of a credit rather than a deduction.
Sometimes, you can claim your home improvement tax benefit quickly and regularly — for example, a tax credit for energy-efficient upgrades or interest paid on a HELOC that goes toward significant repairs. But when it comes to capital improvements, it’s usually a matter of delayed gratification.
You typically can’t claim most capital improvements the year you spend the money. Instead, these improvements add to the cost basis of your home — a valuable number that impacts your tax liability when you sell your home for a profit down the line. These steps can help you track expenses and claim your tax benefits.
Keep detailed records of every home improvement you make, including receipts, invoices, loan statements, and contractor agreements. If you make improvements over time, develop a filing system by tax year. Consider taking before-and-after photos.
As we explored above, some expenses could qualify for a current-year tax credit. Here’s a good guideline: You can usually claim tax credits in the year you incur the expenses. Most tax deductions that increase your home’s cost basis (except for medical deductions) can’t be claimed until the year you sell your home.
If you qualify for tax credits in the current year, you’ll claim these credits using the appropriate IRS form or schedule. If you use tax prep software, the guided prep option will usually help you identify your eligible credits and deductions for the current year and help you enter those figures. If you have questions or aren’t sure how to claim your tax benefits, contact a tax pro for advice so you don’t miss out on valuable savings.
Read more: How to file your tax return for free
Everyone wants to make a profit when they sell their home. Luckily, the IRS respects that and lets homeowners enjoy some of that profit tax-free — provided they’ve owned and lived in the house for two of the five years prior to the sale. Single homeowners get $250,000 in tax-free profit, and married couples filing jointly get double that — $500,000. The profit above and beyond these figures is subject to capital gains tax.
For the 2024 tax year, the capital gains tax brackets are as follows:
Now, let’s look at your home improvement tax savings in action.
Say you bought a house in 2015 for $300,000 and completely renovated your kitchen five years ago to the tune of $50,000. If you sold that home in 2025 for a sweet $625,000, you’ll earn a tidy $325,000 profit. If you’re single, $250,000 is tax-free — leaving $75,000.
Because you file taxes as a single person, the IRS says you get $47,024 at the 0% capital gains rate. Now, you’re staring at a 15% tax bill on the remaining $27,976. But hold up.
That $50,000 you spent on the kitchen remodel gets added to your tax basis.
$300,000 (original purchase price) + $50,000 (kitchen remodel) = $350,000 (new cost basis)
Now, your new IRS profit is:
$625,000 – $350,000 = $275,000
The IRS gives you $250,000 in tax-free profit.
$275,000 – $250,000 = $25,000 net profit
Then, the IRS gives you up to $47,024 at the 0% capital gains rate, which is more than your $25,000 profit, bringing your taxable profit to $0. That’s a huge tax savings.
Original tax bill without the remodel added to cost basis:
$27,976 x 15% = $4,196.40
New tax bill with the remodel added to cost basis:
$0
Dig deeper: Capital gains tax on real estate — How much you’ll pay when selling your home
Yes, you can write off home improvements on your taxes if they meet IRS qualifications for capital improvements. Capital improvements must add longstanding value to your home, extend its useful life, or adapt it to new use.
In some cases, you can write off new flooring on your taxes. The flooring must be permanent and meet the IRS qualifications for a capital improvement, adding long-term value to the home. It’s best to consult with a tax professional on the specific IRS guidelines before assuming that new flooring will qualify for a deduction.
Renovations that qualify as capital improvements under IRS guidelines aren’t directly deducted from capital gains when you sell your home. Instead, those renovations get added to your home’s cost basis and deducted from your home’s sale price to determine how much of your profit is subject to capital gains taxes.
This article was edited by Laura Grace Tarpley.