What Home Improvements Are Tax Deductible

Last updated 05/07/2026 by

Ante Mazalin

Edited by

Andrew Latham

Fact checked by

Andy Lee

Summary:

Most home improvements are not immediately tax-deductible as a personal expense, but four categories of improvements can generate a federal tax benefit depending on how the property is used.

The type of benefit varies: some produce a current deduction, some reduce the capital gain when you sell, and some qualify for depreciation over time.

Medical necessity improvements: Home modifications required for a medical condition, such as wheelchair ramps, grab bars, and widened doorways, are deductible as medical expenses on Schedule A under IRS Publication 502, subject to the 7.5% AGI threshold.
Rental property improvements: Capital improvements to a rental property are not immediately deductible but are recovered through depreciation over 27.5 years on Schedule E under IRS Publication 527. Qualifying repairs remain currently deductible.
Home office improvements: Self-employed filers can deduct improvements to a dedicated home office space in proportion to the business-use percentage of the home under IRC Section 280A and IRS Publication 587. W-2 employees cannot claim this deduction — the One Big Beautiful Bill Act permanently eliminated the miscellaneous itemized deduction for unreimbursed employee business expenses.
Capital basis increases: Any capital improvement to a primary residence increases the adjusted basis under IRS Publication 523, reducing the taxable capital gain when the home is sold.

Most homeowners assume that spending money on their home produces a tax deduction.

For personal residences, that assumption is almost always wrong, but there are specific situations where the tax code does reward home investment, and the rules differ significantly depending on how the property is used.

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What home improvements are tax-deductible? The answer depends on how you use the property

For a personal residence with no rental or business use, home improvements are not currently deductible as an expense on a federal income tax return.

The IRS distinguishes between repairs, which restore existing function, and improvements, which add value or extend useful life. Neither is deductible for a primary residence used solely as a personal home.

What improvements do provide is an increase to the adjusted basis of the property, which reduces the taxable gain when the home is eventually sold, per IRS Publication 523.

Deductions and depreciation do become available when the property serves a medical, rental, or business purpose. The deductible amount and the form used depend entirely on which category applies.

One significant change affects homeowners who previously relied on energy-efficiency tax credits. The One Big Beautiful Bill Act, signed July 4, 2025, terminated the Energy Efficient Home Improvement Credit (IRC Section 25C) and the Residential Clean Energy Credit (IRC Section 25D) for property placed in service after December 31, 2025. No equivalent residential energy credit exists under current law for improvements made in 2026 or later.

Which home improvements qualify — and for which filers?

Eligibility for any tax benefit on a home improvement depends on the purpose of the improvement and the filer’s use of the property.

Medical necessity improvements (itemizers): Eligible under IRS Publication 502 for improvements required by a medical condition affecting the taxpayer, spouse, or a dependent who lives in the home. Qualifying improvements include entrance and exit ramps, widened doorways, grab bars and handrails, lowered cabinets or countertops, and modified electrical outlets. The deductible amount is the cost of the improvement minus any increase in the home’s fair market value. Improvements that do not increase the home’s value are deductible in full as part of qualifying medical expenses exceeding 7.5% of AGI on Schedule A, Line 1.
Rental property owners: Eligible for cost recovery through depreciation under IRS Publication 527. Capital improvements to residential rental property are depreciated over 27.5 years on Schedule E, Part I. Expenses that qualify as repairs rather than improvements — those that maintain but do not materially add to the property — are fully deductible in the year paid. The de minimis safe harbor permits immediate expensing of items costing $2,500 or less per invoice.
Home office users (self-employed only): Eligible to deduct improvements attributable to the home office space under IRC Section 280A and IRS Publication 587. W-2 employees cannot claim this deduction under current law. The TCJA suspended the miscellaneous itemized deduction for unreimbursed employee business expenses through 2025, and the One Big Beautiful Bill Act made that suspension permanent beginning in 2026. The deductible share equals the business-use percentage of the home, typically calculated by dividing the home office square footage by the total home square footage. The improvement is generally depreciated rather than expensed, using a 39-year recovery period for nonresidential property.
Personal-use homeowners (no rental or business use): Not eligible for a current deduction on any improvement. However, capital improvements increase the adjusted basis of the home under IRS Publication 523, which reduces taxable gain on sale. For homeowners who exceed the primary residence capital gains exclusion of $250,000 (single) or $500,000 (married filing jointly), a higher basis directly reduces the tax owed.

Homeowners who use their property exclusively as a personal residence cannot deduct any improvement expense in the year it is paid, regardless of the amount or the type of improvement.

How much of home improvement costs can you deduct?

The deductible amount depends on the category of improvement, the extent of qualifying use, and in the case of medical improvements, the fair market value increase the work produced.

Improvement type and use	Deductible / recoverable amount	Where to report
Medical necessity improvement (itemizer)	Cost minus any increase in home market value; deductible as part of medical expenses exceeding 7.5% of AGI	Schedule A (Form 1040), Line 1
Rental property capital improvement	Recovered through depreciation over 27.5 years (residential rental)	Schedule E (Form 1040), Part I; Form 4562 for depreciation
Home office improvement	Business-use percentage; generally depreciated over 39 years	Schedule C or Schedule E; Form 4562 for depreciation
Personal-use homeowner (capital improvement)	No current deduction; increases adjusted basis, reducing gain on sale	Form 8949 / Schedule D at time of sale

No income phase-out applies to the rental property depreciation deduction or the home office deduction. The medical expense deduction phases out through the 7.5% AGI floor, meaning lower-income filers with modest medical costs may receive no benefit even when the improvement qualifies.

How to claim a tax benefit from a home improvement

The process varies depending on which category applies to your improvement. Here is how to navigate each path correctly.

Identify which category the improvement falls into. Ask: Was this improvement required for a medical condition? Is the property rented out or used as a home office? Or is it a personal residence improvement with no qualifying use? The answer determines both whether a deduction exists and which form to use.
For medical improvements, get a written statement from a physician. IRS Publication 502 recommends documenting the medical necessity of any home modification claimed as a medical expense. Obtain a written recommendation or prescription from the treating physician and retain it with your tax records. Then obtain an appraisal or comparable home sale data showing whether the improvement increased the property’s fair market value, since only the cost above any market value increase is deductible.
For rental or home office improvements, determine whether the cost is a repair or a capital improvement. Under IRS Publication 527, repairs that maintain existing function are currently deductible. Improvements that add value, extend useful life, or adapt the property to a new use must be capitalized and depreciated. Keep separate records for each category.
Report on the correct form and line. Medical improvements go on Schedule A (Form 1040), Line 1, as part of total medical expenses. Rental property capital improvements are reported on Schedule E (Form 1040), Part I, with depreciation calculated on Form 4562. Home office improvements follow the same Form 4562 depreciation path, reported on Schedule C for sole proprietors.
For personal-use improvements, record the cost and add it to your adjusted basis. Retain all receipts, contracts, and permits for every capital improvement. Per IRS Publication 523, these costs increase your adjusted basis and reduce the taxable gain when you sell. Keep these records for as long as you own the home plus at least three years after the sale, under IRC Section 6501.

Common mistakes when deducting home improvements

The most frequent error is treating any home improvement as a currently deductible expense on a personal residence. Replacing a roof, renovating a kitchen, or adding a deck to a primary home does not produce an immediate deduction, no matter the cost. The improvement increases the home’s basis and may reduce capital gains on sale, but provides no current-year tax benefit.

A related mistake is confusing a repair with a capital improvement on a rental property. Replacing a broken water heater is a repair, deductible in the year paid. Installing a new HVAC system that extends the useful life of the property is a capital improvement, required to be depreciated. Misclassifying improvements as repairs overstates current deductions and can trigger IRS corrections on audit.

Claiming the energy credit for 2026 improvements: The IRC Section 25C Energy Efficient Home Improvement Credit and the IRC Section 25D Residential Clean Energy Credit were both terminated for property placed in service after December 31, 2025, under the One Big Beautiful Bill Act. According to IRS guidance on the OBBBA, no residential energy credit exists for improvements made in 2026 or later.
Deducting the full cost of a medical improvement without a fair market value adjustment: If a home modification for medical purposes also increases the property’s fair market value, only the portion of the cost exceeding that increase is deductible as a medical expense under IRS Publication 502. Deducting the full cost when the improvement added market value overstates the deduction.
Failing to track improvements that increase adjusted basis: Homeowners who do not keep records of capital improvements may face a larger taxable gain when they sell. According to IRS Publication 523, every capital improvement made during ownership increases adjusted basis and can reduce or eliminate tax owed on the sale, particularly for homeowners who exceed the $250,000 or $500,000 primary residence exclusion.

Pro tip: Homeowners who perform a medically necessary improvement and also rent out part of their home can claim two tax benefits from the same project. The portion of the improvement attributable to the rented space is recoverable through rental depreciation on Schedule E. The portion attributable to the owner’s living space may qualify as a medical expense deduction on Schedule A, subject to the 7.5% AGI floor. Keeping a clear square footage allocation between the two uses from the start makes the documentation straightforward at tax time.

Home improvements rarely produce a current federal tax deduction for personal-use homeowners, but they nearly always affect the tax outcome at the time of sale. Tracking every capital improvement from the moment you make it is one of the most underutilized tax practices among homeowners.

Key takeaways

Home improvements on a personal residence are not immediately deductible but increase the property’s adjusted basis under IRS Publication 523, reducing taxable gain when the home is sold.
Medical necessity improvements, such as ramps, grab bars, and widened doorways, are deductible under IRS Publication 502 as part of qualifying medical expenses exceeding 7.5% of AGI on Schedule A, reduced by any increase in the home’s market value.
Rental property capital improvements are depreciated over 27.5 years on Schedule E with Form 4562, while qualifying repairs remain fully deductible in the year paid under IRS Publication 527.
The IRC Section 25C Energy Efficient Home Improvement Credit and IRC Section 25D Residential Clean Energy Credit were both terminated for property placed in service after December 31, 2025. No residential energy improvement credit exists under current law for 2026 improvements.

Frequently asked questions about deducting home improvements

Can you deduct home improvements without itemizing?

In most cases, no. Medical necessity improvements require itemizing on Schedule A to generate a current deduction, and only the portion of total medical expenses exceeding 7.5% of AGI is deductible. Rental property depreciation and home office deductions do not require itemizing because they flow through Schedule E or Schedule C rather than Schedule A. Personal-use homeowners who take the standard deduction receive no current deduction for any home improvement.

Are energy-efficient home improvements still tax deductible in 2026?

No. The One Big Beautiful Bill Act terminated both the IRC Section 25C Energy Efficient Home Improvement Credit and the IRC Section 25D Residential Clean Energy Credit for property placed in service after December 31, 2025. Improvements such as new insulation, energy-efficient windows, heat pumps, and solar panels installed in 2026 do not qualify for any federal energy credit under current law. Improvements completed and placed in service by December 31, 2025 may still be eligible for the 2025 credit on a 2025 tax return.

What records do you need for home improvement deductions?

Retain all contractor invoices, receipts, permits, and completion documentation for every improvement, regardless of whether a current deduction applies. For medical improvements, also keep a physician’s written recommendation and any appraisal or market value evidence. For rental property, keep a log separating repairs from capital improvements for each tax year. Per IRS Publication 523, improvement records should be kept for as long as you own the property plus at least three years after the sale, under IRC Section 6501.

Do home improvements qualify if the property is used as both a home and a rental?

Yes, but the cost must be allocated between personal and rental use. Under IRS Publication 527, the rental-use portion of a capital improvement is depreciable over 27.5 years and reported on Schedule E. The personal-use portion adds to the home’s adjusted basis but produces no current deduction. If the improvement also qualifies as medically necessary for the owner’s use of the personal portion, that share may be deductible on Schedule A, subject to the 7.5% AGI floor.

If you are unsure how to classify a home improvement or allocate costs between personal and rental use, a tax professional can review your specific situation. SuperMoney’s tax preparation services comparison includes CPAs with experience in rental property and home office deductions. Homeowners who itemize and want to understand the full scope of what qualifies on Schedule A can review the rules for itemized deductions alongside the medical expense and home improvement rules.

Disclaimer:The information on this page is for general educational purposes only and does not constitute tax, legal, or financial advice. Tax laws are subject to change and vary based on individual circumstances. The content reflects IRS rules as of the date this article was last updated and may not account for recent legislative or regulatory changes. SuperMoney is not a licensed tax advisor, and nothing on this page creates an advisor-client relationship. Consult a licensed CPA or tax professional for guidance specific to your situation.

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