Are home improvements tax-deductible?

Depending on your improvements and loan type, your home improvements may qualify for tax deductions. 

While home improvements can be exciting, they can also be expensive. Being able to deduct home improvements from your taxes is one way to make these expenses more affordable. If you are looking to deduct home projects from your taxes, make sure you itemize your taxes and talk to a tax expert to learn any additional information about your situation or area. 

Homeowners looking to get a loan for any planned renovations can start by filling out a renovation loan application. 

Whether you are a seasoned homebuyer or first-time homeowner, there are many deductions available for home improvements depending on the type of improvements planned. Here are some deductions homeowners making improvements can consider. 

• Energy efficiency
• Medical necessity
• Home offices

Any improvement projects will have to meet eligibility and requirements set for each deduction. Make sure you talk with a tax expert to better learn about any deductions you are hoping to make. 

Home projects you do will fall in one of two categories: capital improvements and repairs. When looking to deduct  home improvements on your taxes, it is important to know the difference. 

Repairs refer to any projects that may restore a home to previous conditions or maintain current condition. Most repairs cannot be deductible. However, there are some that may be tax deductible in the year that the repairs take place. Repairs you may be able to deduct are home office, rental property or disaster related repairs. Capital improvements are any projects that enhance the home and living conditions. Some capital improvements you make could reduce your taxable gain when you decide to sell your home. 

Energy-efficient home improvements aren’t only a great option for the environment and could potentially reduce your utility bills but may also qualify for tax credits. 

These credits can be applied to only your primary residence and will have to be claimed the year these improvements are made and not the year any energy efficient systems are purchased. 

Here are some of the energy-efficient changes that could qualify for tax credits. 

• Insulation
• HVAC systems
• Windows, doors or skylights

If you need to make home improvements for medical reasons, the changes could qualify for tax deductions if certain criteria are met. Tax deduction could depend on your income and how your home’s value changes with improvements. One requirement for your home improvements may be a doctor’s prescription. 

One major medical home improvement that may qualify you for tax deductions is installing ramps or making your home more accessible for mobility impairment. 

If you meet IRS requirements for home offices and working at home, you may be able to take advantage of some tax breaks. 

If you work from home and have a dedicated office space, not just a table that you work on, you might be able to write off a portion of your rent, mortgage, utilities and insurance based on the size of the space you use. 

If you choose to fund any home improvements through a loan that accesses your home equity, the interest you pay on your loan could be tax-deductible. 

Home equity loans, HELOCs and cash-out refinances are three popular ways borrowers choose to tap into their home equity. A borrower’s home equity is the difference between their remaining mortgage balance and current home value.  

While using these loans for any home improvements might not be tax-deductible, the interest that you pay on them could be. 

Installing a new roof is typically not tax-deductible. New roofs are considered home improvements and boost the value of your home, which means the cost of your new roof tends not to be tax-deductible. 

If you choose a loan that taps into your home’s equity to fund a new roof, interest paid on your loan could be tax-deductible. 

While you may not be able to deduct the entire cost of a new HVAC system, you can deduct part of it if the system meets certain energy efficient requirements. 

A new HVAC system that meets criteria set by Energy Efficient Home Improvement Credit can allow you to claim up to 30% of the purchase price and installation cost. 

When looking to add home improvements to your tax filings, there are a few records that will help you.  

Make sure you hold onto these records during your home improvements. 

• Receipts and invoices for material and services
• Contracts that state what work will be done and in what timeframe
• Before and after photos as proof of the work completed

• Warranties for any major appliance you purchase

The first thing any homeowners looking to claim tax deductions on improvements made to their house will want to do is make sure their planned projects meet any guidelines or requirements. 

When you have learned more about your planned home improvements and the tax deductions they may qualify for, the next thing you will want to do is find out how you will fund your projects. There are many loan options available for those looking to make improvements to their home. Some of them can even be started and combined with the loan you use to purchase your home. 

As you begin any home improvement projects, make sure you keep detailed records of all improvements and costs. And, finally, hold onto all these documents until you are ready to file your taxes. 

Ready to start any home renovations? Begin a renovation loan application today! 

_{Rate does not provide tax advice. The consumer should always consult a tax advisor for information regarding the deductibility of interest and other charges in their particular situation.} 

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