Home renovations can not be deducted from your federal taxes but there are several ways you can use home renovations to minimize your taxes. Deductions and tax credits for improvements made to your home at the time of purchase, or later, are the most known ways.
Medically necessary home improvements can be deducted as medical expenses. These include installing entry or exit ramps for wheelchairs, changing bathrooms, installing handrails, changing cabinet heights, or widening doors and hallways. The deduction amount is considered reasonable if it has a medical purpose.
Making home improvements at the time of purchase is one of the ways to save on home renovation costs. Sometimes the cost of your home purchase includes additional money for renovations in the mortgage. The interest on this amount can be deducted from your income as part of your mortgage interest deduction.
Another way to use renovations as a way to avoid taxes is achieved at the time of selling your house. According to Turbo Tax experts: “Under the home sale exemption, you don’t have to pay capital gains tax on the sale of your principal residence if your gain is $250,000 or less ($500,000 if you file Married Filing Jointly). Because some home renovations increase the base value of your home, they can help you lower the amount of the sale price that is considered profit and, therefore, can potentially help you qualify for the home sale exemption to avoid capital gains entirely. Even if it isn’t, the increased value of your home will limit the taxable portion of the sales price.”
Source: https://turbotax.intuit.com/tax-tips/en-espanol/deducciones-de-impuestos-federales-para-la-renovacion-del-hogar/L26FgmaPu
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