Are home improvements tax-deductible? Sometimes – that’s the rule.

If you want to reduce your taxes, you can find relief under your own roof. Some home improvements qualify for tax deductions, especially if they meet the IRS's definition of "capital improvements."

If this sounds tricky, don't worry. We'll walk you through the rules so you know exactly which home improvements are tax-deductible and which are not, so you can join Uncle Sam in saving money while sprucing up your property.

In this article:

Yes, there are tax deductions for remodeling your home. Before you happily walk through the skylight in your living room, here's what you need to know: The IRS has strict rules about the types of home improvements that qualify for tax deductions.

Generally speaking, you can't write off home maintenance—general fixes like a new coat of paint or updating all the doorknobs on your bedroom door. While these to-do items can refresh the look and feel of your home, they qualify as general maintenance that can preserve or restore your home to its baseline.

Now, here's the good news: You can get a tax deduction when you make improvements beyond simple repairs. The IRS calls these types of improvements "capital improvements."

The IRS defines a capital improvement to a property as one that meets one of the following three criteria:

These types of renovations increase your home’s cost basis—its baseline value. For example, a coat of paint may look great but won't materially change the market value of your home. On the other hand, adding an Accessory Dwelling Unit (ADU) can dramatically change the market value of your home when you sell it. See the difference?

Now, let’s discuss this in more detail so you can easily identify the home improvements that are most likely to save you taxes in the future.

Dig deeper: Want to build an ADU or in-law suite? Here's how to finance it.

Now, it’s time to look beyond the skylight – many home improvements qualify as capital improvements. Here are some examples:

That’s a pretty nifty list of tax-free home improvements, right? While most of these improvements don't come cheap, they can all increase the value, longevity, and functionality of your home for years to come. However, they're not the only transitions that can help you get tax relief.

learn more: How much is your house worth? How to Determine Your Home's Value.

All kidding aside, this is where the IRS shines: It provides taxpayers with an array of tax deductions and credits for various property improvements that may not fall within the scope of the capital improvements mentioned above.

If you, your spouse, or a loved one who lives with you needs to make physical modifications to your home due to a disability, those expenses are tax deductible. Some common healthcare additions that comply with IRS guidelines include support bars, ramps at entrances and exits to the home, widening doorways and hallways, and installing elevator equipment to accommodate individuals with disabilities.

You need to itemize your tax deductions to claim these expenses. To qualify for the deduction, medical expenses must exceed 7.5% of adjusted gross income (AGI).

Dig deeper: Standardized deductions vs. itemized deductions—how to decide which tax filing method is right

If you dedicate a portion of your home to work and improve that space, you may be eligible to deduct those expenses on your taxes. The IRS rules on home office deductions are strict, and you can only write off a proportion of the whole-home improvements that apply directly to your dedicated office space. For example, if you spend $10,000 on roof repairs but only use 10% of your house as a home office, your maximum deduction would be $1,000.

Our advice is to consult with a tax professional to ensure that your plans for improvements to your home office comply with IRS guidelines. If you want some (not so) light reading, you can also explore IRS Publication 587, Business Uses of Your Home.

Read more: Who can claim the home office tax deduction?

If you own a rental property as your primary residence, you can recoup some of the annual repairs and maintenance costs through depreciation when you file your taxes. Since rental income can be tricky, we recommend working with a tax professional to get you on the right side of the IRS when calculating deductions for any rental property improvements or expenses.

Improving your home using an improvement loan such as a home equity line of credit (HELOC), home equity loan, cash-out refinance, or FHA 203(k) loan can translate into tax savings. With these loan products, you may be eligible to deduct the interest on your taxes when you use the money to pay for IRS-qualified capital improvements.

Dig deeper: Mortgage interest tax deduction – how it works and when it makes sense

If you make energy-efficient improvements to your primary residence, you may qualify for an annual tax credit of up to $3,200. Credits include:

Improvements must be made in 2023 or later, and the credit period extends to the 2033 tax year. Keep in mind that these are technically tax credits, not deductions, so they work slightly differently.

learn more: Tax Credits vs. Tax Reductions – What’s the Difference, and Which Is Better?

If you installed qualified clean energy equipment in your primary residence between 2022 and 2032, you can apply for the Residential Clean Energy Credit. With this non-refundable credit, you can claim 30% of the cost of improvements including, but not limited to, solar panels and water heaters, wind turbines, fuel cells and geothermal heat pumps. 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, not a deduction.

Sometimes you can quickly and regularly claim home improvement tax benefits, such as tax credits for energy-saving upgrades or HELOC interest for major repairs. But when it comes to capital improvements, it's often a matter of delayed gratification.

Generally, you can't claim most capital improvements in the year you spend them. Instead, these improvements increase your home's cost basis — a number that affects your tax liability when you sell the home for a profit. These steps can help you track expenses and claim tax benefits.

Keep detailed records of every home improvement you make, including receipts, invoices, loan statements and contractor agreements. If you improve over time, develop a filing system by tax year. Consider taking before and after photos.

As we explored above, certain expenses may qualify for tax credits for the current year. Here's a good guide: You can usually claim a tax credit in the year you incur the expense. Most tax deductions that increase the cost basis of a home (except medical deductions) are only available in the year you sell the home.

If you qualify for tax credits for the current year, you will use the appropriate IRS form or schedule to claim these credits. If you use tax preparation software, the guided preparation option will often help you determine your qualified credits and deductions for the year and help you enter those numbers. If you have questions or are unsure about how to claim a tax benefit, contact a tax expert 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 selling their home. Fortunately, the IRS respects this and lets homeowners enjoy a portion of the profit tax-free—provided they owned and lived in it for two of the five years before selling. Single homeowners can get $250,000 in tax-free profits, while married couples filing jointly can get double the amount — $500,000. Profits above these figures are subject to capital gains tax.

For tax year 2024, the capital gains tax brackets are as follows:

Now, let’s look at what your home improvement tax savings actually look like.

Let's say you bought a house in 2015 for $300,000 and had the kitchen completely renovated five years ago for $50,000. If you sell the house in 2025 for $625,000, you will make a handsome profit of $325,000. If you are single, $250,000 is tax-free, leaving $75,000.

Since you filed as an individual, the IRS says you earned $47,024 at a 0% capital gains rate. Now, the remaining $27,976 is subject to a 15% tax bill. But hang in there.

The $50,000 you spend on a kitchen remodel will be added to your tax basis.

$300,000 (original purchase price) + $50,000 (kitchen remodel) = $350,000 (new cost basis)

Your new IRS profit is now:

$625,000 - $350,000 = $275,000

The IRS gives you $250,000 in tax-free profits.

$275,000 - $250,000 = $25,000 Net Profit

The IRS then gives you a whopping $47,024 at 0% capital gains, which is over your $25,000 profit, bringing your taxable profit down to $0. This is a huge tax savings.

Original tax bill without modifications added to cost basis:

$27,976 x 15% = $4,196.40

A new, revamped tax bill has been added to the cost basis:

$0

Dig deeper: Real Estate Capital Gains Tax – How much tax you need to pay when selling your home

Yes, you can write off the home improvement on your taxes if it qualifies as a capital improvement by the IRS. Capital improvements must add long-term value to your home, extend its useful life, or adapt it to a new use.

In some cases, you can write off the new tax. The flooring must be permanent and qualify as a capital improvement by the IRS, adding long-term value to the home. Before assuming new flooring qualifies for a deduction, it's best to consult a tax professional for specific IRS guidelines.

When you sell your home, renovations that qualify as capital improvements are not directly deducted from capital gains under IRS guidelines. Instead, these improvements are added to your home's cost basis and subtracted from your home's selling price to determine how much of your profit is subject to capital gains tax.

The editor of this article is Laura Grace Tarpley.