Are home improvements tax deductible? Only under limited circ*mstances (2024)

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• Home improvements on a personal residence are generally not tax deductible for federal income taxes.
• However, installing energy efficient equipment may qualify you for a tax credit, and renovations for medical purposes may qualify as tax deductible.
• Renovating your home can increase your total financial investment in the property and reduce your taxable capital gain if you sell.
• See Personal Finance Insider's picks for the best tax software.

If you're building a new patio in your backyard or revamping the kitchen in your home, don't expect to get a tax break.

Home improvements are generally not tax deductible under the US tax code.

There are two instances in which you may qualify for a tax break for making specific additions or improvements to your home, but they're uncommon.

You may be able to claim a tax credit for installing energy efficient property

If you installed energy efficient equipment at your home, including solar panels, solar water heaters, geothermal heat pumps, small wind turbines, or fuel cell property, you may be able to claim a tax credit on your IRS return.

A tax credit is a dollar-for-dollar reduction of your tax bill. Some tax credits are refundable, meaning that if what you owe in federal taxes is less than your credit amount, you'll receive the remainder as a refund.

Qualifying energy saving improvements made to a personal residence after December 31, 2019 and before January 1, 2023 can get a creditequal to 26% of the cost of the equipment installed. Your personal residence can include your primary home and a vacation home.

These tax credits are not refundable regardless of the property they're claimed for.

Home renovations made for medical purposes may be tax deductible

Tax deductions reduce your taxable income and lower your overall tax liability. The IRS allows tax deductions on medical expenses related to "the diagnosis, cure, mitigation, treatment, or prevention of disease" — but not until the expenses exceed 7.5% of your adjusted gross income.

Only medical expenses that were paid out-of-pocket and not reimbursed by your health insurance plan qualify as tax deductible. Unless you have sizable medical bills or other itemizations, it's usually not worth forgoing the large standard deduction to write off your health-related costs.

That said, if you made substantial improvements to your home to aid a physically disabled person — yourself, a spouse, or a dependent — or installed special equipment, those costs could be considered medical expenses.

For example, construction of ramps, widening doorways or hallways for wheelchair access, and installing modifications to bathrooms or stairways, including lifts and handrails, will qualify for a full medical deduction as long as their addition does not increase the value of the property. If it does, a partial deduction is allowed.

You can find a full list of home improvements that qualify for the medical deduction on the IRS website.

Home improvements can help you save money on taxes when you sell

Although garden-variety home improvements won't score you a tax deduction right now, they could be helpful in reducing taxes if and when you sell your home.

A homeowner who sells their property for a profit may be eligible to exclude as much as $250,000 of the gain from taxes, or $500,000 if married filing jointly (contingent upon meeting the ownership test and the use test). The gain is calculated using the homeowner's basis, or their total financial investment in the property on the date of sale, which includes the price paid for the home and any improvements you made over the years you owned your home.

The IRS says improvements that qualify to be added to your basis are ones that "add to the value of your home, prolong its useful life, or adapt it to new uses," including interior and exterior modifications, heating and plumbing systems, landscaping, and insulation.

Also, if you're a small business owner who works from your home and claims a home office deduction, you may be able to depreciate the cost of construction.

Generally, the higher your basis in the home, the lower your taxable gain on the sale.