Most home improvements are not tax-deductible, but a few specific situations allow you to claim them

The short answer: you cannot deduct most home improvements on your federal tax return, even if they cost thousands of dollars. The IRS treats improvements as capital additions that increase your home's value, not as deductible expenses. However, there are narrow exceptions. You can deduct improvements that are medical in nature, improvements made to a rental property, or improvements tied to a home-based business. Each path has different rules and documentation requirements.

The distinction matters because the IRS separates repairs (which maintain your home) from improvements (which add value or extend life). A new roof is an improvement. Fixing a leak in an existing roof is a repair. Neither is deductible for your primary home, but the line between them affects what you can claim if you rent out part of your house or run a business from it.

Key Takeaways

  • Home improvements to your primary residence are not deductible, but you may recoup their cost when you sell through the stepped-up basis rule or by excluding capital gains.
  • Medical improvements—ramps, grab bars, widened doorways—can be deductible if they exceed 7.5% of your adjusted gross income and you itemize deductions.
  • Improvements to a rental property or a home-based business space are deductible as business expenses in the year they are made or depreciated over time.
  • You must keep receipts, invoices, and proof of payment for any improvement you claim, and the work must be done by a licensed contractor or documented as your own labor.
  • Selling your home may allow you to exclude up to $250,000 (single) or $500,000 (married) in capital gains if you owned and lived in the home for two of the last five years.

Why home improvements do not count as deductions for your primary residence

The IRS does not allow you to deduct improvements to a home you live in because they are treated as capital assets—things that add lasting value to your property. When you spend $15,000 on a new kitchen, you are not paying for a service that disappears; you are paying for something that becomes part of the house and increases what it is worth. The IRS taxes income, not increases in property value, so the improvement itself is not deductible.

This is different from a repair. If you pay $500 to fix a broken window, that is a repair—it restores the window to its original condition. If you pay $5,000 to replace all your windows with new energy-efficient ones, that is an improvement—it adds value and extends the life of the windows beyond their original state. The IRS allows you to deduct repairs to a rental property, but not improvements to your primary home.

You do not lose the money entirely, though. When you sell your home, you can use the cost of improvements to reduce your taxable capital gain. If you bought your house for $300,000, made $50,000 in improvements, and sold it for $450,000, your gain is $100,000, not $150,000. You may also be able to exclude up to $250,000 (or $500,000 if married) of that gain from your taxes if you meet the ownership and use test.

Medical improvements that may be deductible

Improvements made specifically to accommodate a medical condition can be deductible if they meet two conditions: they must be medically necessary (not just convenient), and your total medical expenses for the year must exceed 7.5% of your adjusted gross income. You must also itemize deductions on your tax return rather than taking the standard deduction.

Examples of deductible medical improvements include a wheelchair ramp, grab bars in a bathroom, widening doorways or hallways, installing an elevator or stair lift, or modifying a kitchen for accessibility. The improvement must be permanent and tied directly to treating or managing a diagnosed medical condition. A general renovation that happens to be easier to use is not deductible.

The cost of the improvement itself is deductible, but only the portion that exceeds the increase in your home's value. If you install a $10,000 wheelchair ramp and it increases your home's value by $3,000, only $7,000 counts toward your medical deduction. You will need a professional appraisal to document this difference. Keep all receipts, the contractor's invoice, and a letter from your doctor stating the medical necessity.

Improvements to rental properties and investment homes

If you rent out your entire home or part of it, improvements to the rental space are fully deductible as business expenses. You can deduct them in the year the work is completed, or you can depreciate them over time—spreading the cost across multiple years. The choice depends on the cost and your tax situation; your accountant or tax preparer can advise which method saves you more money.

Improvements to a rental property include new flooring, painting, fixtures, appliances, or structural work. The key is that the work must benefit the rental space, not your personal use area. If you rent out one bedroom in a two-bedroom house, you can deduct improvements to that bedroom and shared spaces (like a hallway or bathroom the tenant uses), but not improvements to your own bedroom or living room.

Repairs to a rental property are also deductible in the year they are made. The line between repair and improvement matters here too. Replacing a broken toilet is a repair. Replacing all the toilets with new water-saving models is an improvement. Both are deductible for a rental, but they may be claimed differently on your tax return. Keep detailed records of what was done, when, and by whom, along with all invoices and proof of payment.

Home-based business improvements and deductions

If you run a business from your home, improvements to the space where you work may be deductible. The rules depend on whether you use the simplified method or the actual expense method to report your home office.

With the simplified method, you claim $5 per square foot of home office space (up to 300 square feet, or $1,500 per year). You do not deduct individual improvements; instead, you claim a flat deduction. With the actual expense method, you can deduct a percentage of your home's mortgage interest, property taxes, utilities, insurance, repairs, and improvements. The percentage is based on the square footage of your office divided by the total square footage of your home.

If you use the actual expense method and make improvements to your home office—such as new flooring, lighting, or built-in shelving—you can deduct them as a business expense. Keep receipts and document the square footage of the office space. If the improvement benefits the entire home (like a new roof), you can only deduct the percentage that corresponds to your office space.

Documentation and record-keeping for any deduction you claim

The IRS requires proof of any deduction you claim. For home improvements, this means keeping the original contractor's invoice, your receipt showing payment, and any documentation of the work performed. If you did the work yourself, keep receipts for materials and document the hours you spent and the nature of the work.

For medical improvements, also keep a letter from your doctor stating that the improvement is medically necessary and related to a diagnosed condition. For rental property improvements, keep records showing which property the work was done on and whether it was a repair or an improvement. For home office improvements, document the square footage of the office and the total square footage of your home.

If you are audited, the IRS will ask to see these documents. Without them, you cannot prove the deduction, and the IRS will disallow it and may assess penalties. Keep records for at least three years after you file the return, though the IRS can go back longer if it suspects underreporting of income.

How improvements affect your home's basis and future capital gains

When you sell your home, the cost of improvements reduces your taxable gain. This is called basis adjustment. If you bought your house for $200,000 and made $40,000 in improvements, your basis is now $240,000. If you sell for $350,000, your gain is $110,000, not $150,000.

Most homeowners do not owe tax on this gain because of the capital gains exclusion. If you are single, you can exclude up to $250,000 of gain. If you are married filing jointly, you can exclude up to $500,000. To may have access to, you must have owned the home and lived in it as your primary residence for at least two of the five years before the sale.

If your gain exceeds the exclusion limit, improvements become even more valuable because they reduce the amount of gain subject to tax. Keep a file of all improvement receipts and invoices throughout your ownership. When you sell, provide this documentation to your tax preparer so the basis can be calculated correctly.

Frequently Asked Questions

Can I deduct a new roof or HVAC system on my primary home?

No. A new roof or HVAC system is an improvement, not a repair, and improvements to your primary residence are not deductible. However, the cost increases your home's basis, which reduces your taxable gain when you sell. Keep the receipt for the work so you can document the basis increase.

What if I use part of my home as a rental and part as my primary residence?

You can deduct improvements to the rental portion as a business expense. Improvements to your personal living space are not deductible. If an improvement benefits both areas (like a new roof), you can deduct only the percentage that corresponds to the rental space. Document the square footage of each area.

Do I need a contractor's license to claim a home improvement deduction?

No. You can do the work yourself and still deduct it if you are claiming it for a rental property or home-based business. For medical improvements, the work must be done by a licensed contractor in most cases. Keep receipts for all materials and document your labor hours.

Can I deduct energy-efficient improvements like solar panels or insulation?

Not as a standard deduction on your primary home. However, federal tax credits (not deductions) are available for certain energy improvements. These are different from deductions and may reduce your tax liability directly. Check the IRS website or ask your tax preparer about current energy credit programs.

What happens to my improvement deductions if I refinance my home?

Refinancing does not affect your basis or any deductions you have already claimed. The cost of improvements remains part of your home's basis and will reduce your taxable gain when you sell. Refinancing is a separate financial transaction and does not change the tax treatment of past improvements.