Are Home Improvements Tax Deductible? (2024 Guide)

Two types of home improvements typically offer some tax benefits: energy-efficient upgrades and medically necessary renovations.

Energy-Efficient Upgrades

Energy-efficient upgrades may offer substantial tax credits for improvements or renovations to an existing home. Qualifying home renovations may include upgrading exterior doors, windows, skylights and insulation materials or replacing central air conditioners, water heaters or furnaces with more energy-efficient versions. 

For these types of upgrades, the IRS offers a tax credit called the Energy Efficient Home Improvement Credit. A tax credit differs from a tax deduction in that it reduces the amount of taxes you owe dollar-for-dollar. For example, if you owe $2,000 in tax, but have a $1,200 tax credit, your tax bill would be reduced to $800. For that reason, tax credits can often be more advantageous than tax deductions.

It should be noted that these credits do not extend to new home construction.

Medically Necessary Renovations

Home renovations that are medically necessary may qualify for a medical expense deduction. If you need to make changes to your home to create a functional space for you, your spouse or a dependent due to medical issues, you may be able to deduct the cost or part of the cost of the renovations from your taxable income.

Below are some of the medically necessary home improvements the IRS allows you to deduct:

• Installing entrance or exit ramps.
• Widening doorways.
• Widening or modifying hallways and interior doorways.
• Adding railings, support bars or other modifications to bathrooms.
• Lowering kitchen cabinets.
• Moving electrical outlets and fixtures.
• Installing porch lifts and other forms of lifts.
• Modifying fire alarms and smoke detectors.
• Altering stairways.
• Installing handrails or grab bars.
• Changing hardware on doors.
• Grading the property to provide access to the residence.

Major home renovations that don’t qualify for these specific tax savings may still be helpful when you sell your property. Per the IRS, “improvements add to the value of your home, prolong its useful life, or adapt it to new uses. You add the cost of additions and improvements to the basis of your property.” Adding these improvements to your basis calculations can reduce your tax liability once you’ve sold the property.