Tax Deduction for Home Improvements

​Unfortunately, renovations made to your primary home are not usually deductible for tax purposes. However, you can still benefit tax-wise from renovations in certain instances. See below for some examples:

Times When You Can Deduct Home Improvements

• If you pay for the renovations using your home loan, the resulting interest paid on that loan may be deductible (this is not the case in all circumstances...check with your tax advisor on your specific situation)
• If the renovations qualify as medical expenses, they may be deductible (i.e. - exit ramps, bathroom modifications with handicap handles, cabinet lowering, door widening, etc...generally items that make a home wheelchair accessible)
• If the renovations are to install qualified energy items, they may be eligible for energy tax credits (i.e. - geothermal heat pumps, solar water heaters, solar panels, etc.)
• If the renovations increase the value of your home, they may save capital gains tax at the time you sell (i.e. - renovations increase cost basis, which reduces taxable profit...although most primary homes qualify for the capital gains exclusion of $250k or $500k in profits)
• If the renovations are made to your home office used in business, they may have tax benefits

 
Otherwise, renovations and improvements on primary homes are not inherently & automatically tax deductible.

**However, you should still track home improvements, as it can adjust the basis for your eventual home sale gains calculation. For this reason, you’ll want to keep a simple spreadsheet log of improvements over time, along with copies of receipts.

The story is different for rental/investment properties. You can deduct any repairs on rental properties in the year you incur the expense. For capital improvements on rentals, you can deduct the expense over a period of several years.