When it comes to home improvement projects, some upgrades may offer more than just aesthetic benefits-they could also provide tax deductions.
That being said, it's advisable to consult with a tax professional or accountant before undertaking any home improvement project to determine eligibility and ensure compliance with applicable tax laws and regulations.
With that in mind, here are five types of home improvement projects that may qualify for tax deductions.
1. Energy-Efficient Upgrades
Investing in energy-efficient upgrades, such as installing solar panels, energy-efficient windows, doors, or insulation, may qualify for tax credits or deductions as part of the Energy Efficiency Home Improvement Credit program. Homeowners who qualify for the initiative may receive a tax deduction of up to $3,200 for all improvements made after Jan. 1, 2023.
2. Clean Energy Upgrades
Certain clean energy upgrades, such as installing solar water heaters, geothermal heat pumps, or wind turbines, may be eligible for tax credits under the Residential Clean Energy Credit program. These incentives aim to promote renewable energy adoption and reduce reliance on fossil fuels.
3. Historic Home Upgrades
If you own a historic home and undertake restoration or preservation projects approved by relevant historic preservation authorities, you may be eligible for tax deductions or credits under the Federal Historic Rehabilitation Tax Credit program. The program will provide a tax credit equal to 20% of a homeowner's qualified expenses and is allocated over five years.
4. Medically Necessary Upgrades
Home improvement projects that are deemed medically necessary for accessibility or health reasons may be tax-deductible. The amount of tax credit provided through this initiative depends on how the improvement impacts the home's value.
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If the project increases the value of the home, the tax credit will amount to the medical expense minus the increase in home value
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If the home improvement project does not increase the home's value, the homeowner will receive a tax credit that includes the entire cost in the medical expense deducation.
5. Home Office Improvements
If you use a portion of your home exclusively for business purposes, you may be able to deduct certain home office improvements, such as remodeling or repairs, as business expenses. Eligible expenses may include costs associated with setting up or maintaining a dedicated home office space, installing a full home security system, repairing damaged outlets and wiring, or replacing home office windows with dual or triple-pane windows.
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