Are Home Improvements Tax Deductible? 2023

If you’re considering making some improvements to your home, you may be wondering “are home improvements tax deductible”. The answer is, yes, but only under limited and specific circumstances. In general, home improvements are not tax deductible according to the US tax code. 

While some home improvement expenses are tax deductible, most are not. In this article, we’ll take a look at what qualifies as a tax-deductible home improvement and how to claim these deductions on your tax return.

In this video, TurboTax Consultant Richard explains what home repairs are tax deductible:

What Qualifies as a Tax-Deductible Home Improvement?

In order to be tax deductible, a home improvement must be made to a “qualified home.” This includes your primary residence (the home you live in most of the time) and/or a second home that you own. You cannot claim tax for rental properties, vacation homes, or any property that you own but don’t use as a main residence. 

The main distinction in knowing if your home improvement is tax deductible is whether or not the improvement is for you, or for your property.

For instance, a backyard patio or a remodeled kitchen isn’t tax deductible. It’s an improvement that benefits your personal enjoyment of your home. On the other hand, installing solar panels on your roof can qualify as a tax deductible home improvement. This is because solar panels help to maintain, improve and add value to the property beyond a homeowner’s personal enjoyment. 

Here Are More Home Improvements That Are Eligible For Tax Deduction

Energy-Efficient Improvements 

Installing energy-efficient windows, doors, insulation, or heating and cooling systems may be tax deductible considering that these improvements can help to reduce energy costs and increase the value of a home.

Safety And Security Improvements

Installing a home security system, smoke detectors, or fire sprinklers may be tax deductible as a home improvement. Safety and security are necessary and fall under property improvement. 

Structural Improvements

Making structural improvements to a home, such as installing a new roof, repairing foundations, or adding a room, may be tax deductible as a home improvement. These improvements can help to maintain the integrity and value of a home.

Medical Home Improvements

Home improvement expenses related to medical care may be tax deductible if they are necessary for the diagnosis, cure, mitigation, treatment, or prevention of a medical condition and are recommended by a medical professional. Examples of tax-deductible medical home improvements include installing a wheelchair ramp or a walk-in bathtub.

The key takeaway is that home improvement must  be for the purpose of maintaining or improving the property, rather than exclusively for personal enjoyment. This means that you cannot claim a deduction for home improvements that are not necessary or that do not add value to the property, regardless if it increases your home’s value. 

How to Claim Home Improvement Tax Deductions

There are two main ways to claim home improvement tax deductions: through itemized deductions on your tax return or through the home office deduction.

Itemized Deductions

If you choose to itemize your deductions, you can claim home improvement expenses as part of the “miscellaneous itemized deductions” category on Schedule A of your tax return. In order to claim these deductions, you must first meet the “2% rule.” This means that the total of all your miscellaneous itemized deductions must be more than 2% of your adjusted gross income.

For example, if your AGI is $50,000, you would need to have more than $1,000 in miscellaneous itemized deductions to be eligible to claim them. If you do meet the 2% rule, you can claim the amount of your home improvement expenses that exceeds this.

It’s important to note that the Tax Cuts and Jobs Act of 2017 temporarily suspended the deduction for miscellaneous itemized deductions through 2025. This means that you cannot claim home improvement expenses as a miscellaneous itemized deduction on your tax return until at least 2026.

Home Office Deduction

If you use part of your home as a home office, you may be able to claim a home office deduction on your tax return. This deduction allows you to claim a portion of your home improvement expenses as a business expense, as long as the improvements were made to the home office area.

To claim the home office deduction, you must use the space regularly and exclusively for business purposes. This means that you cannot use the space for any personal activities, such as watching TV or sleeping. The home office deduction is calculated by determining the percentage of your home that is used for business purposes and then applying that percentage to your home improvement expenses.

For example, if your home office takes up 10% of your home’s total square footage, you can claim 10% of your home improvement expenses as a business expense. 

It’s important to keep in mind that there are limits to the home improvement tax deductions you can claim. For example, you cannot claim a deduction for the full cost of a home improvement project. We suggest consulting with a tax professional to help you navigate the nuances of what expenses are tax deductible and to ensure that you are claiming the deductions correctly on your tax return. 

At the end of the day, if you’re considering making some home improvements, it’s worth knowing the right answer to “are home improvements tax deductible?”