American Tax Service

Helping Americans File Their Taxes


What Home Improvements are Tax Deductible?

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home owner tax deductionsCan I Get a Tax Deduction for Home Improvements?

Although home improvements cannot be deducted, they may be depreciated.

This simply means you deduct the expenditure over a period of time ranging from three to two and a half years.

To be eligible for depreciation on home renovation and improvement expenses, you must utilize a part of your house for purposes other than a personal residence.

You Can Use Your Mortgage to Improve Your Home

mortgage interest tax deduction

If you’re buying a home, you can reduce the costs of your renovation project by making the changes when you purchase the home.

Sometimes a mortgage will also include money for any changes you need to make.

But the key is this can be added to the price you paid for the home. Therefore, you can claim any mortgage interest as part of the mortgage interest deduction.

7 Home Improvement Tax Deductions for Your House

Making Improvements for Medical Reasons

There are home improvements you can also make that technically count as medical expenses. The catch is they must be considered a medical necessity.

For example, you can install entrance ramps, create modified bathrooms, lower cabinets, widen doors, add handrails, and create special doors. These are all improvements that can be deducted through the medical expense deduction.

The deductions must be considered reasonable and must have a practical use. Architectural and aesthetic purposes don’t count.

However, any improvements designed to increase the value of your home can’t be deducted through the medical expense deduction.

Get Tax Credits for the Way You Generate Energy

Certain energy-generating modifications can also allow you to lower your taxes. For example, energy tax credits can be worth up to 30% of the cost of installation.

These credits apply to improvements like solar panels, wind turbines, fuel cells, geothermal heat pumps, and solar-powered water heaters. All these credits were valid through the 2016 tax year. The solar credits were extended to 2019 and then are available on a reduced basis until 2021.

Green energy systems may also be eligible for tax credits on second and vacation homes. Fuel cells are the exception to this.

The 30% tax credit applies to both labor and installation costs. There are no maximum limits on the amount refunded, other than for fuel cells. For example, if you spend $20,000 installing new solar panels, you would get a credit for $6,000.

You must apply for this tax credit during the tax year that you have them installed. You must also submit a Manufacturer Certification Statement. In addition, you should visit the IRS website for energy tax credits for further information.

Exclusion on the Sale of Your Home

Capital Gains Exclusion for Home Sale

There’s also a home sale exemption to consider. A qualified seller can avoid paying any capital gains tax on their profits when they sell their primary residence. This applies to a profit of $250,000 for a single taxpayer and $500,000 for a married couple filing jointly.

The reasoning behind this is that renovations will reduce the amount of profit you have to declare when you sell your home. So even if you do find yourself paying capital gains tax, the home sale exclusion and your renovations will reduce the amount of tax you pay.

This can be all quite complicated, however. Therefore, make sure you choose online tax software to claim your home improvement tax deductions and pay the least taxes possible.

How to File Taxes Online Using TurboTax

When you file with TurboTax Online they will search over 350 tax deductions and credits to find every tax break you qualify for so you get your maximum refund.​