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Tax season is already here, and if you’ve invested in home improvements last year, you might be wondering if there are tax benefits to claim. The good news? Some home upgrades can help lower your tax bill—if you know where to look.
At Built To Perfection, we help homeowners throughout LA and Orange County build beautiful, functional spaces, and we want to make sure you don’t miss out on potential savings. Here’s your essential Tax Guide for home improvement projects to help you navigate deductions and credits in 2025.
What Home Improvements Are Tax Deductible?
Not all home improvements qualify for tax deductions, but some can provide financial benefits. Generally, home improvements fall into three categories:
Medical necessity upgrades – If you’ve installed ramps, widened doorways, or made modifications for accessibility, these may be deductible as medical expenses.
Energy-efficient upgrades – The IRS offers credits for solar panels, energy-efficient windows, and other eco-friendly improvements.
Home office renovations – If you work from home, you might be eligible to deduct costs related to a dedicated office space.
To calculate your potential savings, you can check with your accountant or use a tax home improvement deductions calculator to estimate how much you could deduct based on the improvements you’ve made.
How to Get Tax Reductions for Home Improvement in 2025
Maximizing your deductions requires careful planning. Here’s how you can make the most of your home improvements when filing your 2025 taxes:
Keep all receipts and documentation – The IRS requires detailed records of the costs and scope of your upgrades.
Distinguish between repairs and improvements – While general repairs (like fixing a leaky faucet) aren’t deductible, improvements that increase your home’s value (like remodeling a bathroom) can qualify.
Claim available tax credits – The Energy Efficient Home Improvement Credit offers up to 30% back on qualifying projects like solar panels, insulation, and high-efficiency HVAC systems.
What Home Improvements Are Tax Deductible When Selling?
If you’re thinking about selling your home, strategic renovations can reduce your capital gains tax burden. Investing in major upgrades such as a kitchen remodel, new roof, or additional living space can increase your home’s value and be added to your home’s cost basis. This means when you sell, your taxable profit could be lower, reducing the amount owed in capital gains taxes. Keeping detailed records of these improvements will be essential when calculating your tax liability.
Additionally, homeowners who have lived in their primary residence for at least two of the last five years before selling may qualify for the capital gains exclusion. The IRS allows homeowners to exclude up to $250,000 of profit from taxes if filing individually or up to $500,000 if married and filing jointly. This exclusion can significantly reduce the taxable amount from the sale of your home, especially if combined with home improvement deductions.
For those planning to sell in the near future, energy-efficient home upgrades can offer a double benefit. Not only can improvements like solar panels, high-efficiency windows, and upgraded HVAC systems increase property value and appeal to buyers, but they may also qualify for tax credits. Many federal and state programs provide incentives for homeowners who invest in energy-efficient solutions, making it a financially smart choice even before listing your home.
IRS Home Improvement Deductions: What to Know
Understanding IRS guidelines is crucial to ensuring you maximize your deductions without errors. The IRS allows deductions for specific home improvements, such as home office expenses, rental property improvements, and medically necessary renovations. If a portion of your home is exclusively used for business purposes, improvements made to that space may be deductible. Similarly, if you own a rental property, upgrades could qualify as business expenses, helping to offset rental income. Home modifications made for medical necessity, such as wheelchair-accessible entrances or bathroom modifications for mobility, may also be deductible if they do not increase property value beyond the cost. For more precise calculations, consult a professional to estimate your deductions accurately and ensure compliance with IRS regulations.
Tax Home Improvement Deductions in California
California homeowners may have additional benefits when it comes to tax deductions. Here are a few state-specific opportunities:
California Solar Incentives – In addition to federal tax credits, the state offers additional incentives for solar installations.
Seismic retrofit deductions – If you’ve made earthquake-resistant upgrades, you may qualify for tax benefits.
Property tax exclusions for energy-efficient improvements – Certain green upgrades can help reduce your property tax assessment.
Tax home improvement deductions California – California residents may also qualify for state-specific deductions based on recent legislative updates, particularly for eco-friendly and accessibility-based home improvements.
Get the Most from Your Home Improvements
Whether you’re upgrading your home for personal comfort or preparing it for sale, understanding tax deductions can help you make smarter financial decisions. The key is to document all improvements, take advantage of available credits, and consult with a tax professional if needed.
Need help with your next home improvement project? Contact Built To Perfection for a free estimate and expert guidance.