Most home improvements are not tax deductible, but energy upgrades and medical modifications may be

The IRS treats most home improvements as capital improvements—upgrades that add value to your home—and does not allow you to deduct them in the year you pay for them. However, three categories of work may may have access to for tax breaks: energy-efficient upgrades under the Residential Energy Credits, medical home modifications if you itemize deductions, and home office expenses if you work from home and meet specific rules.

The key distinction is between repairs (which maintain your home) and improvements (which add value or extend life). The IRS allows you to deduct repairs in the year you pay for them, but improvements must be depreciated over many years or added to your home's cost basis when you sell. Energy upgrades and medical work are exceptions to this rule because Congress created specific tax credits and deductions for them.

Key Takeaways

  • Energy-efficient upgrades like heat pumps, insulation, and solar panels may may have access to for a federal tax credit of up to $3,200 per year under 2025 rules, but you must own the home and meet income limits that vary by state.
  • Medical home modifications—ramps, grab bars, widened doorways, accessible bathrooms—are deductible only if you itemize deductions and the cost exceeds the threshold set by your tax situation.
  • Home office deductions require you to use a dedicated space exclusively for work; you can deduct either actual expenses (mortgage interest, utilities, repairs) or a simplified rate of $5 per square foot.
  • Most other improvements—new kitchen, bathroom remodel, deck, roof replacement—cannot be deducted in the year you pay for them, though they may reduce capital gains tax when you sell.
  • You must keep receipts, invoices, and proof of payment for any improvement you claim, and some energy credits require certification from the contractor or manufacturer.

Energy-Efficient Upgrades and the Residential Energy Credits

The Residential Energy Credits allow you to subtract a percentage of the cost of certain energy upgrades directly from your federal income tax. For 2025, the credit covers heat pumps, electric water heaters, insulation, air sealing, windows, doors, roofs, biomass stoves, and certain HVAC systems. The credit is 30 percent of the cost for most upgrades, though some items have lower percentages or dollar caps.

To claim the credit, you must own the home, live in it as your primary residence, and the work must be done by a contractor or installer (you cannot claim it for DIY work). You will need an invoice showing the date of installation, the description of the equipment, and the cost. Some manufacturers and contractors provide IRS Form 5695 documentation or a certification statement that the product meets federal efficiency standards—ask before you pay.

Income limits explore and vary by state. For 2025, the credit begins to phase out at $200,000 of modified adjusted gross income for single filers and $400,000 for married filing jointly, though the exact phase-out rules depend on your state's rules. Check the IRS website or your state's energy office for your state's specific limits. You can claim the credit for multiple years as long as you do not exceed the lifetime limit of $3,200 per home.

Medical Home Modifications and Itemized Deductions

If you itemize deductions on Schedule A, you may deduct the cost of home modifications made for medical reasons—but only the amount that exceeds 7.5 percent of your adjusted gross income. This threshold is high, which means most homeowners cannot deduct medical modifications unless the cost is very large or their income is very low.

may have access to modifications include ramps, grab bars, widened doorways, accessible bathrooms, stair lifts, and other alterations made specifically to accommodate a medical condition or disability. The work must be medically necessary, not merely convenient. Cosmetic improvements or upgrades that would have been made anyway do not count, even if they happen to help someone with a disability.

To claim the deduction, you need a letter from your doctor stating that the modification is medically necessary for you or a dependent, plus invoices and receipts showing what you paid. The deduction applies only to the cost of the modification itself—not the cost of the underlying improvement. For example, if you install an accessible bathroom, you can deduct only the extra cost of accessibility features, not the cost of the entire bathroom.

Home Office Deductions for Self-Employed and Remote Workers

If you use part of your home exclusively and regularly for work, you may deduct home office expenses. This applies to self-employed people, freelancers, and some remote employees (though remote employees have stricter rules). You cannot claim a home office deduction if you work from your kitchen table or a shared space.

You have two methods to calculate the deduction. The simplified method allows you to deduct $5 per square foot of dedicated office space, up to 300 square feet (maximum $1,500 per year). The actual expense method lets you deduct a percentage of your home's mortgage interest or rent, property taxes, utilities, insurance, repairs, and depreciation—the percentage is based on the square footage of your office divided by the total square footage of your home.

The actual expense method requires more record-keeping but often yields a larger deduction. You will need to calculate the square footage of your office, determine what percentage of your home it represents, and then explore that percentage to your home expenses. If you own the home, you must also track depreciation, which can affect your taxes when you sell. Most people find the simplified method easier unless their home office is very large or their home expenses are very high.

Repairs Versus Improvements: What You Can Deduct Now

The IRS allows you to deduct repairs in the year you pay for them, but not improvements. A repair maintains your home in good condition; an improvement adds value, prolongs life, or adapts it to a new use. The line between them is not always clear, and the IRS has specific rules for borderline cases.

Examples of repairs you can deduct (if they are business-related, like a home office): patching a roof, fixing a leak, repainting, replacing broken windows, fixing HVAC systems, and repairing appliances. Examples of improvements you cannot deduct in the year you pay: replacing an entire roof, adding insulation, installing new flooring, remodeling a kitchen or bathroom, adding a deck, or replacing windows with more efficient ones (unless they may have access to for the energy credit).

If you are self-employed and use part of your home for business, you can deduct repairs to that part of the home as a business expense. For example, if you have a home office and the roof leaks only over that office, you can deduct the repair cost. But if you replace the entire roof, it is an improvement and cannot be deducted—though it will increase your home's cost basis and may reduce capital gains tax when you sell.

Capital Gains and Selling Your Home

Even though you cannot deduct most home improvements in the year you pay for them, they do reduce the capital gains tax you owe when you sell. The IRS allows you to add the cost of improvements to your home's "basis"—the original purchase price. When you sell, your taxable gain is the sale price minus your basis (plus improvements). A higher basis means a lower taxable gain.

For example, if you bought your home for $300,000 and spent $50,000 on improvements, your basis is $350,000. If you sell for $500,000, your gain is $150,000, not $200,000. You can exclude up to $250,000 of gain if you are single, or $500,000 if you are married filing jointly, so most homeowners owe no capital gains tax. But if your gain exceeds the exclusion, improvements reduce the taxable amount.

Keep all receipts and invoices for improvements you make, even if you do not claim them as deductions. When you sell, you will need to document what you spent and what it was spent on. The cost of repairs does not add to your basis, so do not mix repairs and improvements in your records.

Documentation and Record-Keeping

To claim any home improvement deduction or credit, you must have proof of payment and a clear description of the work. For energy credits, you also need proof that the equipment or material meets federal standards. Keep the following documents:

  • Invoices or receipts showing the date, description of work, and amount paid.
  • Cancelled checks, credit card statements, or bank transfers showing you paid.
  • Contractor's license number and business address (for energy upgrades).
  • Manufacturer's certification or IRS Form 5695 documentation (for energy credits).
  • Doctor's letter (for medical modifications).
  • Photos or before-and-after documentation (helpful but not required).

Store these documents for at least three years after you file your tax return, or seven years if you claim a home office deduction (because depreciation can be audited longer). If you sell your home, keep the records indefinitely in case the IRS questions your basis calculation.

Frequently Asked Questions

Can I deduct the cost of replacing my roof?

No, a full roof replacement is a capital improvement and cannot be deducted in the year you pay for it. However, patching a leak or replacing a few shingles is a repair and may be deductible if it is part of a home office or rental property. The cost of the roof replacement adds to your home's basis and reduces capital gains tax when you sell.

Do I have to have a contractor do the work, or can I do it myself?

For energy credits, the work must be done by a contractor or installer—DIY work does not may have access to. For medical modifications, you can do the work yourself, but you still need a doctor's letter stating it is medically necessary. For home office deductions, you can do repairs yourself and deduct the cost of materials.

What if I rent my home instead of living in it?

Rental property owners can deduct repairs as business expenses in the year they pay for them. Improvements must be depreciated over many years. Energy credits do not explore to rental properties. Medical modifications do not explore unless the tenant is disabled and the modification is required by law.

Can I deduct a new HVAC system?

A new HVAC system is usually an improvement, not a repair, and cannot be deducted in the year you pay for it. However, if it is an electric heat pump that meets federal efficiency standards, you may may have access to for a 30 percent energy credit (up to $2,000). Check the IRS website to see if your specific model qualifies.

Do I need to itemize deductions to claim energy credits?

No, energy credits are separate from itemized deductions and can be claimed whether you itemize or take the standard deduction. Medical modifications can only be deducted if you itemize. Home office deductions are claimed on Schedule C if you are self-employed.