If you've ever poured time and money into your home—remodeling the kitchen, installing a new roof, or adding a deck—you might have wondered whether those improvements are tax deductible. The answer isn't as straightforward as you might hope, but understanding the rules can help you maximize potential tax benefits both now and in the future.
Table of Contents:
1. Understanding the basics of home improvement deductions
2. What the IRS says about home improvement deductions
3. When home improvements may offer tax benefits
4. How home improvements can affect capital gains taxes
5. Energy efficient home improvements and tax credits
6. Record keeping tips to maximize tax benefits
7. Why tax-savvy home ownership matters
At a glance:
Whether or not home improvements are tax deductible depends largely on the type of work you're doing and your specific circumstances. The IRS has a strict definition of capital improvements and repairs, and this difference is key for taxes:
Here's where many homeowners face disappointment: most home improvements are not deductible in the year they're made. Unlike business expenses, you can't simply write off a kitchen renovation or new flooring on your current tax return.1
However, this doesn't mean your improvements provide no tax benefit. They may impact your capital gains tax when selling the home. Every piece of paperwork regarding capital improvements—invoice, contract, and receipt— should be filed away for safe keeping. These documents may prove valuable when you eventually sell your property.
While immediate deductions for home improvements are limited, there are specific situations where you might qualify for tax benefits in the current year.
If improvements are made for medical reasons, a portion may be deductible as a medical expense. These modifications might include installing wheelchair ramps, widening doorways for accessibility, modifying bathrooms for safety, or adding stairlifts for mobility assistance.
However, there are important limitations. Medical home improvements are only deductible if the total cost exceeds a certain percentage of your adjusted gross income.2 Additionally, any improvement that increases your home's value reduces the deductible amount.3 To qualify, the improvements must be primarily for medical care rather than general convenience or luxury.
If you qualify for the home office deduction, you might be able to deduct a portion of improvements that benefit your office space. However there are strict IRS criteria to meet, including that your office space must be used regularly and exclusively for business purposes.4
While immediate deductions may be limited, capital improvements offer significant long-term tax advantages through their impact on capital gains taxes.
Capital improvements increase your cost basis—essentially, what you've invested in your home. Your cost basis includes your original purchase price plus the cost of substantial improvements over the years. When you sell, this higher cost basis can reduce your taxable profit, potentially saving you thousands in capital gains taxes.
If you bought your home for $300,000 and invested $50,000 in capital improvements, your cost basis becomes $350,000. If you sell for $500,000, your taxable gain is $150,000 rather than $200,000. This benefit is especially valuable for homeowners who expect significant appreciation in their property value.
The IRS has specific criteria for what qualifies as a capital improvement. Generally, these are projects that add value to your home, extend its useful life, or adapt it for new purposes. Examples of qualifying capital improvements include5:
While most home improvements don't qualify for immediate deductions, energy-efficient upgrades often qualify for tax credits. These credits can provide immediate tax benefits while also increasing your home's value and reducing energy costs.
Some home improvements may qualify for federal tax credits:
Check the latest IRS guidelines and manufacturer certifications to confirm eligibility. State and local governments often provide additional incentives for energy-efficient home improvements.
Proper documentation is crucial for maximizing the tax benefits of home improvements. Create a comprehensive filing system that includes receipts and invoices, contracts and permits, before-and-after photos, and warranty information.
Consider maintaining a home improvement log that tracks dates, costs, contractors, and the nature of each project. This documentation will be invaluable when calculating your cost basis for capital gains purposes or when working with insurance companies after a claim.
Educated homeowners make smarter financial and renovation decisions by understanding the full picture of their investments. Being tax-smart means considering not just immediate costs and benefits, but also the long-term impact when selling your home.
This knowledge empowers you to prioritize improvements that offer the best combination of lifestyle benefits, property value enhancement, and tax advantages. It also helps you make informed decisions about timing—whether to bunch improvements in a single year or spread them over time. Knowing which projects might qualify for immediate tax benefits can influence your renovation timeline and financial planning.
At Openly, we understand that your home is more than just a place to live—it's a significant investment that deserves adequate protection. We help protect your valuable upgrades through coverage that reflects your home's true value, including improvements and renovations.
Ready to see how Openly can support your homeownership journey? Get a Home Insurance Quote or Find a Local Independent Agent today.
For more insights about protecting your home improvements and maximizing your homeownership experience, explore The Open Door blog. Our commitment extends beyond home insurance—we're here to provide clear, supportive guidance at every step of your homeowner journey.
This content is for general informational purposes only. It is not intended to be comprehensive and should not be construed as professional tax or financial advice for any specific individual tax situation. Taxpayers should always consult a qualified professional for individual guidance.
1 TurboTax. “Federal Tax Deductions for Home Renovation.” TurboTax. Published August 10, 2025. Accessed August 28, 2025. https://turbotax.intuit.com/tax-tips/home-ownership/federal-tax-deductions-for-home-renovation-/L1Xgiv2gh
2 Internal Revenue Service. “Publication 502 (2024), Medical and Dental Expenses.” Accessed 30 August 2025. https://www.irs.gov/publications/p502
3 Gabriella Cruz-Martinez. “Tax-Deductible Home Improvements for Retirement.” Kiplinger. Updated August 2025. Accessed 28 August 2025. https://www.kiplinger.com/taxes/income-tax/603276/tax-breaks-for-homeowners-and-home-buyers
4 TurboTax. “Home Improvements and Your Taxes.” Turbotax. Published 31 July 2025. Accessed 28 August 2025. https://turbotax.intuit.com/tax-tips/home-ownership/home-improvements-and-your-taxes/L6IwHGrx6
5 TurboTax. “Home Improvements and Your Taxes.” Turbotax. Published 31 July 2025. Accessed 28 August 2025. https://turbotax.intuit.com/tax-tips/home-ownership/home-improvements-and-your-taxes/L6IwHGrx6
6 Internal Revenue Service. “Energy Efficient Home Improvement Credit.” IRS. Updated 29 May 2025. Accessed 28 August 2025. https://www.irs.gov/credits-deductions/energy-efficient-home-improvement-credit
7 Energy Star. “Federal Tax Credits.” Energy Star. Accessed 28 August 2025. https://www.energystar.gov/about/federal-tax-credits