Are Home Renovations Tax Deductible or Eligible for Tax Credits?

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If you’re wondering are home improvements tax-deductible, here’s the quick answer: most aren’t — at least not right away.

But depending on the type of renovation, you could qualify for valuable tax deductions or credits. Upgrades related to energy efficiency, medical needs, or a home office could put money back in your pocket at tax time.

This guide breaks down which renovations may qualify, how to claim them and what documentation you’ll need to stay on the IRS’s good side.

Are Home Improvements Tax-Deductible?

Americans spent over $481 billion on home improvements in 2023, and this number is expected to grow in the coming years as more homeowners invest in energy-efficient upgrades and aging-in-place renovations.

Unfortunately, most home improvements won’t reduce your tax bill in the year you make them. That said, there are two important exceptions:

• Capital improvements can lower your taxes when you sell your home by increasing your cost basis.
• Medical or home office upgrades may be deductible in the year you make them, if you meet IRS guidelines.

The IRS separates home-related costs into two buckets:

• Repairs (like patching a wall): Not deductible.
• Improvements (like installing a new roof): Potentially deductible or credit-eligible later.

Fun fact: According to the Joint Center for Housing Studies, U.S. homeowners spent over $567 billion on home improvements and repairs in 2022, a 15% jump from 2021.

What’s the Difference Between a Tax Deduction and Tax Credits?

Here’s a quick cheat sheet:

A $1,000 deduction might save you $220 if you’re in the 22% tax bracket, but a $1,000 credit knocks $1,000 off your tax bill.

Which Home Improvements Are Tax-Deductible?

Some improvements can qualify for deductions under the right conditions:

1. Medical and Accessibility Upgrades

Medically necessary renovations — like adding a wheelchair ramp or widening doorways — may qualify as medical expense deductions.

Eligible examples:

• Entrance ramps
• Modified bathrooms (grab bars, roll-in showers)
• Widened doorways
• Lowered light switches or countertops

Note: You can only deduct the portion that doesn’t increase your home’s value. These go on Schedule A of your tax return and must exceed 7.5% of your AGI.

2. Home Office Improvements

If you’re self-employed and work from a dedicated home office, some improvements may be deductible:

• 100% deductible: Changes made only to the office space (like flooring or paint).
• Partially deductible: Whole-house upgrades (like a new HVAC system) can be deducted based on the percentage of your home used for business.

IRS data shows nearly 15 million Americans claimed home office deductions in recent years.

What Home Improvements Qualify for a Tax Credit?

Tax credits offer even better savings and typically cover energy-saving home improvements. Two key programs to know:

Residential Clean Energy Credit (Through 2034)

Covers 30% of the cost of eligible systems, like:

• Solar panels
• Geothermal heat pumps
• Battery storage
• Solar water heaters

According to the U.S. Department of Energy, the average cost to install solar panels is around $15,000 to $25,000 — making the 30% credit worth thousands. On top of that, more than 3.7 million U.S. households installed solar panels between 2020 and 2023, driven in part by the federal clean energy tax credits and rising utility costs.

Energy Efficient Home Improvement Credit

Covers up to 30% of costs (subject to annual caps):

• Windows: Up to $600
• Doors: Up to $500 total
• Insulation: Up to $1,200
• Heat pumps and A/C: Up to $2,000

This credit resets yearly, so you can spread upgrades across multiple years for maximum benefit.

Are Medical or Accessibility Renovations Deductible?

Yes — but only when medically necessary. That means:

• You itemize deductions
• Costs exceed 7.5% of your adjusted gross income (AGI)

Example: Installing a stair lift for an elderly parent may qualify, especially if it doesn’t increase your home’s value.

Pro Tip: Keep letters from doctors and all receipts to prove the medical necessity.

How to Claim Home Renovation Tax Benefits

Ready to get your tax break? Here’s what to do:

1. Save Every Receipt

Track materials, labor, permits and any documentation of medical need or energy efficiency.

2. Use the Correct Forms

• Schedule A for itemized deductions (medical/home office)
• Form 5695 for energy credits

3. Get Help If Needed

Home tax rules are tricky. A tax professional can ensure you’re not leaving money on the table. Expert help is especially important because taxpayers who claim home office deductions are more likely to be audited if they don’t follow strict eligibility rules, according to IRS audit data.

Capital Improvements and Selling Your Home

Many improvements won’t save you money this tax season — but they could pay off when you sell.

What Counts as a Capital Improvement?

These upgrades increase your home’s value and cost basis:

• New roof
• Kitchen or bath remodels
• HVAC replacement
• Room additions

When you sell, your capital gains tax is based on your profit. A higher cost basis means a smaller taxable gain.

Pro Tip: Capital gains exclusions top out at $250,000 for single filers ($500,000 if married). Capital improvements help you stay under the limit.

What to Remember About Home Improvement Tax Benefits

• Most home improvements aren’t tax-deductible in the year you make them.
• Energy-efficient upgrades could qualify for valuable federal tax credits.
• Medical or home office upgrades might be eligible for deductions.
• Keep records of all renovations–they could help reduce your tax bill when you sell.
• Unsure what qualifies? Talk to a tax pro before you file.

Next move: Go through your past and future home projects, gather receipts and check if any qualify for tax benefits. A few minutes of prep could mean hundreds — or thousands — in savings.

Data is accurate as of August 5, 2025, and is subject to change.

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