Home improvements are usually not tax deductible, but repairs and medical upgrades sometimes are

The IRS treats home improvements and repairs differently. A repair fixes something broken or worn—replacing a leaky roof, patching drywall, repainting a wall. These are not deductible. A home improvement adds value or extends the life of your home—a new roof, an addition, new plumbing. These are also not deductible in the year you pay for them, though they may reduce your capital gains tax when you sell.

The main exception is medical-related improvements. If you install a ramp, widen doorways, add grab bars, or modify a bathroom for someone with a disability living in your home, you can deduct the cost as a medical expense—but only the portion that exceeds 7.5% of your adjusted gross income for the year. Energy-efficient upgrades like solar panels and heat pumps may have access to for a federal tax credit (not a deduction), which is different and often more valuable.

Key Takeaways

  • Repairs that maintain your home in its current condition are not deductible; improvements that add value or extend life are also not deductible in the year you pay, though they reduce capital gains when you sell.
  • Medical home modifications for a disabled resident can be deducted as medical expenses, but only the amount above 7.5% of your adjusted gross income counts.
  • Energy-efficient upgrades like solar panels, heat pumps, and insulation may may have access to for a federal tax credit worth 30% of the cost, which is separate from deductions.
  • Keep receipts and documentation for all home improvements, because the cost basis affects your taxes when you sell the house.
  • Improvements made to rent out a room or property are treated differently and may be depreciable over time rather than deductible when ready.

The difference between repairs and improvements

The IRS draws a line between keeping your home in working order and making it better. A repair restores something to its original condition. Replacing a broken window, fixing a leak, repainting, patching a foundation crack, or replacing worn flooring are repairs. You cannot deduct these.

An improvement adds new value, extends the useful life of the home, or adapts it to a new use. Installing a new roof (versus patching the old one), adding a deck, finishing a basement, upgrading plumbing or electrical systems, or installing new flooring where none existed are improvements. The cost does not come off your taxes in the year you pay it. Instead, it increases your "cost basis"—the amount you paid for the house plus improvements. When you sell, your capital gains tax is calculated on the difference between your sale price and your cost basis. A higher basis means lower gains and lower tax.

The line is sometimes blurry. Replacing a roof is an improvement. Repairing the existing roof is a repair. If you replace part of a roof and repair the rest, the IRS may treat the whole job as a repair if the improvement portion is minor. Document what was actually done, not just the invoice total.

Medical modifications and disability-related upgrades

Home modifications for a person with a disability are treated as medical expenses, not home improvements. This means they can be deducted in the year you pay for them, subject to the medical expense threshold. The modification must be medically necessary—prescribed or recommended by a doctor—and must benefit someone who lives in your home.

may have access to modifications include ramps, widened doorways, grab bars, accessible showers or bathtubs, stair lifts, elevators, modified kitchens, and accessible parking spaces. The cost of the modification itself is deductible, but not the cost of improvements that add value to the home beyond the medical need. For example, if you install a luxury accessible bathroom that costs more than a standard accessible bathroom, only the standard cost counts.

To deduct medical expenses, your total medical expenses for the year must exceed 7.5% of your adjusted gross income (AGI). If your AGI is $60,000 and your medical expenses total $5,000, only the $500 above the threshold ($5,000 − $4,500) is deductible. You must itemize deductions on Schedule A to claim medical expenses; you cannot use the standard deduction.

Energy-efficient upgrades and the federal tax credit

Solar panels, heat pumps, energy-efficient windows, insulation, and certain HVAC systems may may have access to for a federal tax credit. A credit is different from a deduction—it reduces your tax bill dollar-for-dollar, making it more valuable. The Inflation Reduction Act expanded these credits significantly starting in 2023.

Solar panel installation qualifies for a 30% credit on the full cost, including labor. Heat pumps for heating and cooling may have access to for up to $2,000 per system. Energy-efficient windows, doors, and insulation may have access to for up to $3,200 combined. Electric heat pump water heaters may have access to for up to $3,750. You do not have to itemize deductions to claim these credits, and they explore whether you own or rent your home (though renters have different rules).

These credits are not deductions. You claim them on Form 3468 (Investment Credit) or Schedule 5 of your tax return. The credit amount and rules change yearly, so check the IRS website or a tax professional for the current year's limits and requirements.

Home improvements and your cost basis when you sell

Even though you cannot deduct home improvements in the year you pay for them, they matter at tax time when you sell your house. Your cost basis is what you originally paid for the home plus the cost of improvements. When you sell, your capital gain is the sale price minus your cost basis. Capital gains tax applies only to the gain, not the full sale price.

If you bought your house for $300,000, spent $50,000 on improvements, and sold it for $450,000, your cost basis is $350,000 and your gain is $100,000. If you are married filing jointly and lived in the home for at least two of the last five years, you can exclude up to $500,000 of the gain from taxes. Single filers can exclude up to $250,000. In this example, the entire $100,000 gain would be excluded, and you would owe no capital gains tax.

Keep all receipts and documentation for improvements. If you cannot prove the cost, the IRS will not let you add it to your basis. Take photos before and after, keep invoices, and note the date and description of the work.

Improvements to rental property or a rented room

If you rent out part of your home or own a rental property, improvements are handled differently. Instead of increasing your cost basis, they are usually depreciated over time. Depreciation lets you deduct a portion of the improvement cost each year over a set period (typically 27.5 years for residential rental property). This can result in larger deductions in the early years than you would get from straightforward adding the cost to your basis.

Repairs to rental property are fully deductible in the year you pay for them, which is the opposite of owner-occupied homes. The distinction between repair and improvement still applies, but the tax benefit is when ready rather than deferred. If you rent out a room in your home, you can deduct a portion of home improvements that benefit that room, allocated by square footage.

Rental property improvements and depreciation are complex, and the rules depend on whether you own the property outright, have a mortgage, or are depreciating it. Consult a tax professional if you own rental property.

What you cannot deduct and common mistakes

Routine maintenance is never deductible—lawn care, cleaning gutters, painting, replacing worn carpeting, or fixing minor damage. Cosmetic upgrades that do not extend the life of the home are not deductible either. Upgrading kitchen cabinets, replacing flooring for aesthetic reasons, or redecorating are improvements, not deductions.

Do not confuse home office deductions with home improvements. If you use part of your home for business, you can deduct a portion of rent, utilities, and depreciation, but only if you meet IRS requirements for a dedicated workspace. This is separate from home improvement deductions.

Mortgage interest and property taxes are deductible, but they are not related to home improvements. They are claimed separately on Schedule A if you itemize.

Frequently Asked Questions

Can I deduct the cost of a new roof?

No. A new roof is a home improvement, not a deduction. The cost increases your cost basis, which reduces capital gains tax when you sell. If you are replacing part of an old roof and repairing the rest, the IRS may treat the whole job as a repair if the improvement portion is minor. Keep detailed documentation of what was actually replaced.

What if I install solar panels—can I deduct the cost?

You cannot deduct the cost, but you can claim a federal tax credit for 30% of the installation cost, including labor. This credit is more valuable than a deduction because it reduces your tax bill directly. The credit applies whether you own or rent your home.

Do I need to itemize deductions to claim medical home modifications?

Yes. Medical expenses, including home modifications for disability, are claimed on Schedule A only if you itemize. Your total medical expenses must exceed 7.5% of your adjusted gross income for the year. If your medical expenses are below that threshold, you cannot deduct them.

Can I deduct the cost of painting my house?

No. Painting is routine maintenance, not a deductible expense or improvement. If you are painting a rental property you own, you can deduct it as a repair in the year you pay for it, but not for your primary residence.

What happens to home improvements if I sell my house at a loss?

Home improvements increase your cost basis, which reduces your capital gain when you sell at a profit. If you sell at a loss, you cannot deduct the loss on your personal tax return. The improvements still increase your basis, but they do not create a tax benefit in that scenario.