Homeowners

Top Home Improvement Tax Deductions for Homeowners

With tax season in full swing, savvy homeowners are learning that last year’s home improvements for their primary residence may become this year’s tax breaks.

Some home improvements are tax deductible, including certain medically necessary renovations and qualifying home office expenses. Energy-efficient upgrades may qualify for federal tax credits, while capital improvements can potentially reduce capital gains taxes when you sell your home. Eligibility depends on the project, how the home is used, and current IRS rules.

Tax benefits also depend heavily on when the improvement was completed and what type of project it was.

These write-offs can result in a refund or reduce what you owe Uncle Sam when you file your taxes.

So, which home improvements pay off the most when it comes to tax time?

Tax deductions vs. tax credits

Before you get excited about how much money you’ll be able to get back from the Internal Revenue Service (IRS) after you complete your remodel, it’s important to understand the difference between tax deductions and tax credits.

According to the IRS, “a deduction is an amount you subtract from your income when you file so you don’t pay tax on it.” A credit, on the other hand, is subtracted from the amount of tax you owe after you file.

For instance, if you make $100,000 and have a tax deduction of $5,000, your taxable income would be $95,000.

By contrast, if you owe $7,000 in taxes and have a $5,000 tax credit, it would be subtracted from your tax bill, and you would only owe $2,000.

There’s also an important distinction between a current tax deduction and a capital improvement. Many renovations aren’t deductible in the year you complete them. Instead, qualifying capital improvements may increase your home’s cost basis, potentially reducing your taxable gain when you eventually sell.

Can you deduct home office upgrades from your taxes?

In some cases, home office upgrades can be deducted if you’re self-employed. However, hybrid and remote workers who are employed by a company or organization aren’t eligible for the deduction.

Often, however, these improvements are recovered over time through depreciation.

Self-employed homeowners who qualify for the home office deduction can generally choose between the simplified method and the regular method. Under the simplified method, the deduction is $5 per square foot of qualifying home office space, up to 300 square feet, for a maximum of $1,500.

The regular method generally allows eligible taxpayers to deduct a percentage of qualifying home expenses based on the portion of the home used for business.

Medical accommodations may be tax deductible

Some necessary medical accommodations can fall into tax deduction territory. Projects like widening doorways, installing grab bars, or building a ramp to make the home more accessible for someone with a medical condition may count as a tax write-off.

Other medically necessary home improvements, such as modifying bathrooms or lowering cabinets, may also qualify in certain circumstances when they are undertaken primarily for medical care.

The “deductible portion is often reduced if the improvement increases the home’s value,” said Ruth White, the owner of White Sands Tax Services in Long Beach, Calif.

Capital improvements may lower your tax bill when you sell your home

For a home improvement project to qualify as a capital improvement, it needs to substantially add to the value of the real property and be a permanent improvement. These types of projects can ultimately lower the capital gains taxes you may owe when you sell your home.

Rather than producing an immediate home improvement tax deduction, qualifying capital improvements generally become part of the home’s adjusted cost basis. A higher cost basis can reduce the amount of taxable gain when the property is eventually sold.

Many homeowners won’t owe capital gains tax when they sell. They can generally exclude up to $250,000 in profits if they’re single and $500,000 if they’re married and this was their primary home for at least two of the last five years.

But if your profits exceed the limits, qualifying home improvements can help you to bring your tax bill down. That’s why it’s important to save all the receipts.

Improvements can include additions, such as new rooms, garages, or decks; new driveways; new furnaces, central air conditioning, and wiring; storm windows and doors; a new roof; insulation; and plumbing projects, among many others.

Are home repairs tax deductible?

Routine repairs and maintenance on a primary residence generally aren’t tax deductible simply because you paid to have them done.

There is an important difference between repairing something and making a capital improvement that adds value, prolongs the home’s useful life, or adapts it to a new use.

Homeowners should keep records of major improvements even when they don't provide an immediate tax deduction because those costs may become important when calculating the home’s adjusted cost basis at sale.

Homeowners may be able to deduct home equity loan interest

If you take out a home equity loan to pay for home improvements, you may be able to deduct the interest from the loan. This would apply to Home Equity Lines of Credit (HELOCs), cash-out refinances, second mortgages, and certain other loans.

But there is a big catch.

“You must be able to document that the loan proceeds were used only for qualifying improvements,” said White. “And your total itemized deductions must exceed your standard deduction.”

For 2025 federal income taxes, interest on a home equity loan or HELOC may be deductible when the borrowed money is used to buy, build, or substantially improve the home securing the loan, subject to IRS requirements and applicable limits.

Energy-efficient upgrades may provide tax credits

Energy-efficient upgrades are eligible for tax credits, but not tax deductions.

Homeowners filing their 2025 taxes in 2026 may still be able to claim the Energy Efficient Home Improvement Credit for qualifying improvements placed in service by Dec. 31, 2025. Eligible improvements included certain heat pumps, insulation, exterior doors, windows and skylights, electrical equipment, and home energy audits.

The credit generally covered 30% of certain qualified expenses, subject to annual and project-specific limits. Depending on the improvements, homeowners could qualify for up to $3,200 in credits for the year.

However, the Energy Efficient Home Improvement Credit is no longer available for property placed in service after Dec. 31, 2025.

If you completed an energy-efficient upgrade to your home in 2025, such as installing a heat pump, talk to your tax professional about how to claim the credits to reduce what you owe in taxes.

How to claim home improvement tax write-offs

To ensure homeowners can claim every available tax write-off, it’s important to keep all the paperwork. It may help to stash the receipts in a folder.

“Save every invoice and proof of payment and add a brief note about what the project was and why it was done,” said White.

You can also “bundle” standalone repairs into a larger home improvement project. When this happens, White said, “they can sometimes be treated as part of the overall improvement if they add value to the home.”

Figure out which category a project falls under and then organize your records accordingly.

Bottom line

For homeowners wondering which home improvements are tax deductible, the answer depends on the project, how it was paid for, and how the home is used.

Home office improvements, medically necessary renovations, capital improvements, energy-efficient home upgrades, and projects financed with a home equity loan or HELOC may qualify for a federal tax deduction or tax credit in certain circumstances.

Keeping receipts and records for renovations such as a new roof, HVAC system, insulation, windows, plumbing, additions, and accessibility upgrades can also matter years later when you sell your home and calculate capital gains taxes.

Tax rules and eligibility requirements can change, so homeowners should check current IRS guidelines and consult a qualified tax professional before claiming a home improvement tax deduction or credit.