Most home improvements are not tax-deductible, but a few specific types are

The general rule is straightforward: improvements that add value to your home, prolong its life, or adapt it to new uses are capital improvements, and you cannot deduct them as a current expense. Instead, they increase your home's cost basis — the amount you add to what you originally paid for the house. When you eventually sell, a higher basis reduces your taxable gain. This is different from repairs, which keep your home in its current condition and also are not deductible if the home is your primary residence.

However, a narrow set of home improvements can be deducted in the year you make them if they meet specific conditions. These are improvements that are also medical equipment or modifications, or improvements that may have access to for energy tax credits. The distinction matters because the tax benefit works differently for each type.

If you are a landlord or own a rental property, the rules are different — repairs and some improvements to rental property can be deducted as business expenses. This guide covers owner-occupied homes only.

Key Takeaways

  • Home improvements that add value, like a new kitchen or deck, increase your cost basis but cannot be deducted in the year you pay for them.
  • Medical home modifications — ramps, grab bars, widened doorways — can be deducted as medical expenses if they exceed 7.5% of your adjusted gross income and you itemize deductions.
  • Energy improvements like heat pumps, solar panels, and certain insulation and windows may may have access to for federal tax credits that directly reduce your tax bill, not just your basis.
  • The difference between a repair (not deductible) and an improvement (basis-increasing) depends on whether the work restores the home to its original condition or goes beyond it.
  • Rental property owners can deduct repairs and some improvements as business expenses in the year incurred, which is a different rule than for primary residences.

Medical Home Modifications as a Deductible Expense

If you or a dependent has a medical condition, certain home modifications can be deducted as medical expenses on Schedule A (itemized deductions). The modification must be medically necessary — not merely convenient or a general upgrade — and must be made primarily to accommodate the condition.

Common examples include a wheelchair ramp, grab bars in the bathroom, widened doorways to fit a wheelchair, a stair lift, or modifications to a kitchen to accommodate mobility limitations. The cost of the modification itself is deductible, but not the cost of any improvement that adds value to the home beyond the medical purpose. For example, if you install a ramp that also serves as a decorative entryway, only the ramp portion counts.

To deduct medical expenses, your total medical expenses for the year must exceed 7.5% of your adjusted gross income (AGI), and you must itemize deductions on Schedule A rather than take the standard deduction. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married filing jointly, so you need substantial medical expenses to benefit from itemizing. You will also need documentation from a physician stating the medical necessity of the modification.

Energy Improvements and Federal Tax Credits

Energy-related home improvements are treated differently from other capital improvements because they may may have access to for a federal tax credit rather than just increasing your basis. A credit directly reduces the tax you owe, dollar for dollar, which is more valuable than a deduction.

The Residential Energy Credit (Form 5695) covers improvements like solar electric systems, solar water heaters, geothermal heat pumps, and battery storage systems. The credit is 30% of the cost for most systems through 2032, with no upper limit. You do not have to itemize to claim it.

The Energy Efficient Home Improvement Credit covers other upgrades: heat pumps (air source, ground source, or water source), heat pump water heaters, heat pump dryers, insulation, air sealing, windows, doors, roofs, and biomass stoves. The credit is typically 30% of the cost, up to $3,200 per year for most improvements, though some categories have higher limits. Again, you do not need to itemize.

To claim either credit, you must have paid for the improvement in 2024, and the improvement must meet Department of Energy efficiency standards. The contractor or manufacturer usually provides a certification statement showing the product meets the standard. Keep receipts and the certification with your tax records.

The Difference Between a Repair and an Improvement

The IRS distinguishes between repairs, which maintain your home in its current condition, and improvements, which add value or extend the life of the home. Repairs are not deductible for a primary residence. Improvements increase your basis.

The line is not always obvious. Replacing a broken window is a repair. Replacing all the windows in your home with energy-efficient ones is an improvement — even though it may also reduce your energy bills. Patching a roof is a repair. Replacing the entire roof is an improvement. Repainting a room is a repair. Adding a new room is an improvement.

A useful test: if the work restores the home to the condition it was in before the damage or wear, it is likely a repair. If it goes beyond that — making the home better, more durable, or more valuable than it was before — it is an improvement. In borderline cases, the IRS looks at whether the work is part of a larger project. If you replace one section of siding as a repair, but then replace all the siding, the entire project may be treated as an improvement.

How Basis Works When You Sell Your Home

When you sell your primary residence, you can exclude up to $250,000 of gain from tax if you are single, or $500,000 if you are married filing jointly, as long as you owned and lived in the home for at least two of the five years before the sale. This exclusion applies whether or not you itemize deductions.

Your basis is what you paid for the home plus the cost of improvements you made. If you paid $300,000 for the house and spent $50,000 on improvements, your basis is $350,000. If you sell for $500,000, your gain is $150,000 — well below the $250,000 exclusion if you are single. The improvements reduced your taxable gain by $50,000.

Keep records of all improvements: receipts, invoices, and photos. If you claim a medical deduction or energy credit for a modification, that does not prevent you from also increasing your basis for the remaining cost. For example, if a ramp costs $5,000 and $2,000 qualifies as a medical deduction, the remaining $3,000 increases your basis.

Rental Property: Different Rules for Landlords

If you own a rental property, the rules are much more favorable. Repairs to rental property are deductible as business expenses in the year you pay for them. Improvements are also deductible, but over time through depreciation rather than all at once.

For example, if you replace the roof on a rental house, you can depreciate the cost over 27.5 years (the useful life of residential rental property). Each year, you deduct a portion of the cost. This is different from a primary residence, where the cost straightforward increases your basis and is not deducted until you sell.

Rental property owners should track repairs and improvements separately and consult a tax professional, because the rules are complex and the tax benefit is substantial. A repair that is not deductible on a primary residence becomes deductible on a rental property.

What to Keep and How to Document

For any home improvement, keep the original receipt or invoice showing what was purchased, the date, and the amount paid. If you are claiming a medical deduction, also keep the physician's statement of medical necessity. If you are claiming an energy credit, keep the manufacturer's or contractor's certification that the product meets Department of Energy standards.

Take photos of the work before and after, especially for significant improvements. If you later sell the home, these records help you prove the cost of improvements and support your basis calculation. The IRS can ask for documentation years after the sale if your gain is questioned.

For energy credits, the contractor should provide Form 5695 instructions or a summary of what you can claim. Do not rely on the contractor to file the credit for you — you file it on your own return.

Frequently Asked Questions

Can I deduct the cost of painting my house?

No. Painting is considered maintenance and repair, not an improvement, so it is not deductible. It also does not increase your basis because it does not add value or extend the life of the home beyond its original condition.

If I install solar panels, do I deduct the cost or claim a credit?

You claim a 30% federal tax credit on Form 5695, not a deduction. The credit directly reduces your tax bill. You do not have to itemize to claim it. The remaining 70% of the cost increases your basis.

What if I made a home improvement in 2023 but did not pay for it until 2024?

For tax purposes, you deduct or claim a credit in the year you actually pay, not the year the work is done. If you paid in 2024, you claim the benefit on your 2024 return, even if the contractor finished the work in 2023.

Can I deduct the cost of a new HVAC system?

A new HVAC system is an improvement, not a repair, so you cannot deduct it. However, if it is a heat pump system, you may may have access to for a 30% energy credit up to $3,200. The remaining cost increases your basis.

Do I need to itemize deductions to claim an energy credit?

No. Energy credits are claimed on Form 5695 and reduce your tax bill directly, regardless of whether you itemize or take the standard deduction. This makes them more valuable than deductions for most taxpayers.