Are Home Improvements Tax Deductible?

Feb 28, 2024

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A couple examining blueprints against a wall, potentially involved in home renovation or construction planning.

With all the upkeep a home usually requires, homeowners will likely wonder whether their home improvements are tax deductible. Home improvements are generally not tax deductible – but there are exceptions.

Your upgrade may be tax deductible if it meets the Internal Revenue Service (IRS) criteria for capital improvements. However, you won’t get the tax benefits until you sell the home. There are expectations for certain renovations. Homeowners can typically deduct improvements made for medical reasons, like making a home wheelchair accessible, while they still own the home.

IRS Requirements For Tax-Deductible Home Improvements

Homeowners can only deduct capital improvements from their taxes when they sell their homes. Capital improvements are permanent upgrades, adaptations or enhancements that improve the property and increase a home’s value. For a renovation to qualify as a capital improvement, the IRS says the improvement must meet one of the following conditions:

  • The improvement adds substantial value to your home.
  • The improvement prolongs the useful life of the property.
  • The improvement is permanent.
  • The improvement adapts the property to new uses.

According to the IRS, qualifying capital improvements aren't taxed directly but can affect the taxes you pay when you sell the property. This is why homeowners need to document improvements during a renovation or remodel and keep the receipts as proof.

The total cost of capital improvements gets added to the cost basis of the house, which is what you paid to purchase the property. When you sell, the higher cost basis due to capital improvements may reduce the capital gains tax you owe on the sale of the property, lowering your tax liability. While routine maintenance and repairs aren’t eligible for tax deductions, they may be part of a larger renovation project that increases the property's value, extends its useful life or adapts it to new uses.

See What You Qualify For