Not all home upgrades qualify. Learn are home renovation expenses tax deductible, which improvements might count, and how to stay on the IRS’s good side.
Most homeowners go into renovations thinking it’s just an expense. But somewhere along the way, someone always asks the golden question:
“Wait… are home renovation expenses tax deductible?”
It’s a fair question, especially when you’re dropping thousands on kitchen remodels, roof replacements, or energy upgrades. You start wondering if you can recoup any of this during tax season.
The short answer is Sometimes.
But not in the way most people assume.
In this post, we’re unpacking exactly what qualifies, what doesn’t, and how to make sure your renovation decisions support your bottom line come April.
We’ll also spotlight a trusted contractor who can help you make tax-smart renovation choices from day one.
What the IRS Says About Home Renovations
According to IRS guidelines, most home renovation expenses are not directly tax deductible in the year you spend the money.
That’s because the IRS considers renovations as capital improvements. Which means they add value to your property, rather than being necessary business or medical expenses.
But that doesn’t mean you’re out of luck. There are three key exceptions:
- Home office renovations
- Energy-efficient upgrades
- Medical necessity modifications
And there’s a fourth category that’s not immediate, but still powerful: capital improvements that reduce your taxable gain when you sell your home.
Let’s break them all down.
Tax-Deductible Renovation Types (With Examples)
1. Home Office Renovations
If you’re self-employed and use part of your home exclusively and regularly for business, you may deduct:
- A portion of renovation costs related to the home office space
- Repairs and improvements that affect only that space (e.g., repainting, installing shelves, new lighting)
However, here’s the catch: the space must be used exclusively for business purposes. A spare bedroom where you sometimes take Zoom calls? That won’t fly.
2. Energy-Efficient Home Improvements (Tax Credits)
Thanks to the Inflation Reduction Act, there are updated credits available through 2032:
Up to 30% of the cost for qualified upgrades
Annual limits of $1,200–$2,000 depending on the improvement
Applies to things like:
- Energy Star-certified windows and doors
- Insulation and air sealing
- Heat pumps and solar panels
These are credits (not deductions), which means they reduce your tax bill dollar-for-dollar. That’s a big win.
3. Medical-Related Renovations
If renovations are made for medical necessity, some or all may be deductible if:
- They’re prescribed by a licensed medical provider
- They don’t increase your home’s value significantly.
Eligible improvements might include:
- Widening doorways for wheelchair access
- Installing ramps, lifts, or accessible bathroom fixtures
- Lowering countertops
You’ll need documentation, and you can only deduct the amount that beats 7.5% of your adjusted gross income (AGI).
Capital Improvements & the Home Sale Exclusion
Here’s where many homeowners get the most long-term tax benefit.
While you can’t deduct the cost of a renovation now, you can use those expenses to lower the capital gains tax when you sell.
Example:
- You bought your home for $300,000
- You spent $50,000 upgrading the kitchen, roof, and HVAC
- You sell the house later for $600,000
Your capital gains aren’t based on $600K minus $300K. Instead, they’re based on $600K – $350K (your adjusted basis includes renovations).
That extra $50K in improvements reduces your taxable profit, and, for some, can keep them under the IRS’s $250,000 (single) or $500,000 (married) capital gains exclusion.
That’s a tax-saving move worth planning for.
Renovations That Don’t Count (But People Think They Do)
Here’s what usually trips people up. These common upgrades are not tax-deductible unless they fall into one of the exceptions above:
- New flooring
- Bathroom remodels
- Paint jobs
- Room additions
- Pool installations
- Landscaping
These are considered personal expenses or general home maintenance. Even if they increase your home’s value, you can’t claim them now, you’ll have to wait until you sell.
Rental Properties Are a Different Story
Own a rental property? You’re in luck.
Many home improvement and repair costs for rentals are deductible, either:
Immediately (for repairs and maintenance)
Over time (depreciated as capital improvements)
If you’re running short-term rentals like Airbnb, or managing long-term tenants, you should speak with a tax advisor to structure this correctly.
The rules are different, and often more favorable.
Record-Keeping Is Everything
Whether your renovation qualifies for a current-year deduction, future basis adjustment, or not at all, you must keep detailed records.
Here’s what to save:
- Contractor invoices and receipts
- Permits and inspection documents
- Proof of payment (bank or credit card records)
- Product documentation (e.g., Energy Star certifications)
A solid paper trail means less stress during tax time, and more flexibility when selling your home.
What Homeowners in Florida Need to Know
Florida homeowners, especially those in the Orlando area, should be strategic with their home renovations.
Because:
- Property values are rising, which means higher capital gains
- Energy-efficient upgrades qualify for state + federal credits
Hurricane-resistant features (impact windows, stronger roofs) may count toward insurance discounts, not tax deductions, but still financial wins
If you’re working with a contractor in Florida, make sure they understand both the construction and financial implications of your project.
The Contractor You Need If You’re Thinking Long-Term
When planning a renovation, it’s not just about how it looks, it’s about how it pays off. That’s why smart homeowners work with professionals who don’t just do quality work but also help you make financially smart decisions.
For those looking for Orlando home renovation, Holland Builders Co. is one of the most trusted names in the game. They’re known for:
- Transparent estimates with financial clarity
- Tax-smart renovation planning for long-term equity
- Exceptional craftsmanship across kitchens, bathrooms, roofing, and more
- Deep experience with energy-efficient installations and structural upgrades
If you’re investing in your home, do it with a team that gets the full picture, not just the surface work.
Conclusion: Renovate Smart, Document Everything, and Think Long-Term
So, are home renovation expenses tax deductible?
The honest answer is: not usually right now, but very often, yes later.
While most renovations don’t reduce your taxes immediately, they can still bring massive financial benefits over time, especially when you sell your home, improve your energy efficiency, or add medically necessary features.
By planning smart, keeping receipts, and working with the right professionals (like Holland Builders Co.), your next renovation can be more than just a lifestyle upgrade; it can be a financial strategy.
