When you spend money upgrading your home, it is natural to wonder: are home renovations tax deductible? Or if you can get some of that money back at tax time. The answer is sometimes. Most home renovations are not immediately tax deductible, but some projects can save you money now or in the future when you sell your home.
This guide explains exactly which home improvements might qualify, how deductions work, and the simple steps you can take to make sure you do not miss out on potential savings.
Quick Answer: Most Renovations Are Not Deductible Right Away
For the average homeowner, you cannot claim most renovations as a deduction in the same year you pay for them. However, certain improvements can be:
- Deductible immediately (in specific situations like medical upgrades or home offices).
- Tax credit eligible (such as energy-efficient improvements).
- Added to your home’s cost basis so you pay less capital gains tax when you sell.
How Taxes Treat Home Renovations vs. Repairs
Before we dive into deductions, it helps to know the difference between a repair and an improvement in IRS terms.
- Repairs: Fixing something broken or maintaining your home in good condition. Example: patching a leaky roof, replacing a window pane, or repainting walls. Repairs are not tax deductible for your primary residence.
- Improvements (Capital Improvements): Capital home improvements are permanent changes that add value, extend the home’s life, or adapt it for new use. Example: installing a new roof, upgrading electrical wiring, or adding a bathroom. These are not immediately deductible, but they can reduce taxes when you sell.
Capital Improvements That May Save You Money Later
The IRS defines a capital improvement as something that:
- Adds significant value to your home
- Extends the property’s useful life
- Becomes a permanent part of the home
Examples:
- Adding a new room or home addition
- Installing central air conditioning or a new furnace
- Upgrading plumbing or electrical systems
- Replacing the roof
- Installing energy-efficient windows and doors
- Major kitchen or bathroom remodels
- Adding insulation
- Installing built-in appliances or custom cabinetry
When you sell your home, the cost of these improvements is added to your cost basis (what you paid for the home). This higher cost basis can lower the amount of profit that is taxed.
Special Situations Where Renovations Can Be Deducted Now
Some projects qualify for immediate tax deductions or credits. These include:
1. Home Office Improvements
If you run a business from your home and have a dedicated workspace, you can deduct the cost of improvements to that space.
Examples: built-in shelving, upgraded lighting, or new flooring for the office.
Tip: The space must be used exclusively and regularly for business to qualify.
2. Medical-Related Improvements
If you make renovations for medical reasons, you may deduct the cost as a medical expense.
Examples:
- Adding wheelchair ramps
- Widening doorways
- Installing grab bars in bathrooms
- Lowering cabinets for accessibility
If the upgrade increases the home’s value, you may only deduct part of the cost.
3. Energy-Efficient Upgrades
The IRS offers tax credits for certain energy-saving improvements.
Examples:
- Solar panels
- Energy-efficient HVAC systems
- Energy-efficient windows and doors
- Certain water heaters
As of 2025, homeowners may qualify for up to $3,200 per year in credits for eligible projects.
4. Rental Property Improvements
If you rent out part of your home, improvements to the rental space are deductible as a rental expense. You can also depreciate the cost over time.
What Is Not Deductible
These common upgrades and repairs do not qualify for deductions on your primary residence:
- Painting the interior or exterior
- Replacing a broken appliance
- Fixing leaks
- Replacing worn carpet with the same material
- Patching walls
However, if these are part of a larger renovation (for example, replacing cabinets during a full kitchen remodel), they can be included in the total cost.
How to Claim Tax Benefits from Renovations
The benefit you get depends on the type of project:
- Capital Improvements – Added to your home’s cost basis; you benefit when you sell.
- Home Office or Medical Upgrades – Deducted in the same year you pay for them (if you qualify).
- Energy-Efficient Improvements – Tax credits claimed in the same year.
Why Good Recordkeeping Is Key
To get any tax benefit from your renovations, you must have proof of what you spent. Keep:
- Receipts and invoices
- Contracts
- Permits and inspection reports
- Photos of before and after
- Payment records
If you sell your home, you will need this documentation to prove your cost basis.
Selling Your Home and Capital Gains Taxes
Under current tax laws –
- If you are single, the first $250,000 of profit from selling your primary home is tax-free.
- If you are married and file jointly, the first $500,000 is tax-free.
If your profit is higher than those limits, capital improvements you made can reduce the taxable amount.
Example:
- You bought your home for $300,000 and sold it for $700,000.
- You made $80,000 in capital improvements.
- Your adjusted cost basis becomes $380,000.
- Your taxable gain is reduced accordingly.
Tax Deduction vs. Tax Credit: Know the Difference
- Tax Deduction: Lowers your taxable income (example: home office expenses).
- Tax Credit: Directly reduces the taxes you owe (example: solar panel credit).
Credits are generally more valuable because they reduce your tax bill dollar-for-dollar.
Simple Steps to Maximize Your Tax Benefits
- Plan before you renovate – If a project might qualify for a credit or deduction, know the rules before starting.
- Keep all paperwork – Missing receipts can mean losing the deduction.
- Work with a tax professional – Especially important if you have multiple qualifying projects or own rental property.
- Think long-term – Even if there is no immediate deduction, capital improvements can save you money when you sell.
