3 Common Home Renovation Tax Questions — And the Straight Answers, From a CPA

Homeowners in the United States often spend heavily both to buy a house and to improve it after moving in.

According to Angi data, U.S. homeowners spent an average of $12,472 on home projects, a figure that was up 3.5% from the previous year.

With that much money on the line, many people look for tax strategies that might help offset the cost of renovations and upgrades.

Here are three frequently asked questions about home improvement taxes — and the answers a certified public accountant says really apply.

Can I Deduct Renovation Costs?

Among tax questions tied to home improvements, this is the one people ask most often, said Chad Cummings, an attorney and CPA at Cummings & Cummings Law who previously worked in finance and tax.

So, are renovation expenses deductible on a personal tax return?

“For a personal residence, the answer is almost always no,” Cummings told MoneyLion.

Most qualifying capital improvements instead add to a home’s tax basis, which can lower the taxable gain when the property is eventually sold.

“But there is no immediate deduction, and deducting the costs of renovation can constitute tax fraud,” Cummings said.

He said the best protection is careful recordkeeping. Homeowners should keep invoices, permits, contracts and proof-of-payment receipts for every improvement project.

“A $150,000 renovation without records can become $150,000 of basis the IRS may challenge when the property sells years down the road, resulting in a higher tax bill,” he said.

Are All Home Improvement Projects Treated the Same for Tax Purposes?

Usually, the answer is no.

“Repairs are another issue,” Cummings said. “Repainting a room usually does not increase the basis, while replacing the roof generally does. Mixed projects require careful allocation rather than treating every contractor invoice as a capital improvement — a major mistake I see all the time.”

He added that tax treatment can differ depending on whether the property is a primary residence or an investment property, and that state tax rules do not always match IRS rules on deductions.

Do Energy-Efficient Projects Qualify for Tax Credits?

Cummings cautions clients not to assume that an energy-efficient upgrade automatically brings a tax credit. In most cases, it does not.

“The major federal residential energy credits ended after 2025 as a result of the OBBBA (One Big Beautiful Bill Act) that [President Donald] Trump signed into law, although some state incentives may remain,” Cummings said.