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Home Improvements That Qualify for Tax Deductions

by Ryan Guina

Did you know that some home improvements may qualify for federal tax deductions or tax credits?  Knowing which renovations and improvements are eligible for tax deductions can help you decide whether or not to make the improvements, and can help you correctly claim deductions or credits for these renovations when you file your taxes.

Internal Revenue Standards for Home Improvement Tax Deductions

In order to qualify as tax deductions, your home improvements must meet one of the following three criteria:

  • be an energy efficient upgrade
  • be for medical reasons, like a wheelchair ramp
  • use a home equity line of credit to pay for the improvements (only the interest on the loan is tax deductible).

Home Improvements That Qualify for Tax Deductions or Credits

A note about tax deductions and tax credits. Some of these improvements will qualify for a tax deduction, while others may qualify for a tax credit. There is a bog difference between the two: a tax deduction reduces the amount of income that the IRS considers to be taxable income, while a tax credit reduces the amount of taxes you pay.

Difference Between Home Repairs and Home Improvements

A common mistake many homeowners make is trying to deduct the cost of home repairs at tax time – which are different from home improvements.  Fixing things that break around your home are considered home repairs, and do not qualify for tax deductions.  Replacing your front door, bath tub or electrical system are all examples of home repairs, not improvements.

If the repairs are completed at the same time as a qualified home improvement, then you can calculate a deduction for some of that cost.  For example, if you are renovating the bathroom with an energy efficient upgrade of some sort, and discover you must also repair faulty plumbing, you can include it’s cost as part of the home improvement.

Energy Efficiency Tax Credits

When you upgrade your home to improve energy efficiency, there are often tax deductions or credits you’re allowed to take.  Each type of upgrade will qualify for a limited amount of tax deduction – so if you spend $1,000 upgrading with better insulation and heating equipment, you may be limited to a $500 tax deduction.  Sometimes energy efficient upgrades do not count for tax deductions: installing solar water heaters to heat your swimming pool, for example.  The exact amount of tax deductions and allowable upgrades will vary year to year, so check with a tax advisor before making any upgrades to fully understand your options. Check out these Sears Coupons for discounts on Energy Star appliances an other energy efficient upgrades.

Qualified Medical Home Improvement Deductions

If you are making home improvements for medical reasons and because of a doctor statement indicating it’s a necessary improvement, you can count the improvement as a tax deduction.  Examples of improvements might be a wheelchair ramp, allergy-free filtration systems, or removing mold.  You’re allowed to deduct medical expenses for home improvements that cost more than 7.5% of your adjusted gross income.

Save even more with energy efficient products

The IRS offers tax credits and deductions for energy efficient products because they reduce the overall amount of energy usage in our country. They also save consumers a lot of money. In many cases, the reduced energy usage and tax credits will pay for the energy efficient products in a matter of a couple years (of course this varies by product).  You can save even more if you take some time to seek out discounts before you shop for home improvement supplies. Check out these Home Depot Coupons for general supplies, and other home improvement coupons & deals for other home improvement needs.

Note: These tax rules are subject to change, so be sure to verify with the IRS or a tax professional before making any repairs or improvements. For more information, see IRS publication 17, which explains which items you may claim a deduction or credit for.


Published or updated October 7, 2011.
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