Homeowners planning energy work ask what home improvements are tax deductible. DuloCore read the IRS, Franchise Tax Board and State Board of Equalization pages on October 13, 2026. The IRS publications cited are the editions for 2025 returns, not rules for 2026 returns. This page is general information, not tax advice.
Are Home Improvements Tax Deductible?
Generally no. IRS Publication 530, the edition for 2025 returns, says a homeowner can't deduct the cost of improvements and must add it to the home's basis instead. DuloCore checked on October 13, 2026.
IRS Publication 530 describes an improvement as work that materially adds to the value of a home, considerably prolongs its useful life, or adapts it to new uses.
What Does Adding Improvements to Basis Mean for Energy Work?
Publication 530 says a home's basis is generally what it cost and is the starting point for figuring gain or loss on a later sale.
IRS Publication 523, its guide to selling a home (edition for 2025 returns), has a chart of improvements that increase basis. It includes:
- Heating system, central air conditioning and duct work
- Insulation in the attic, walls and floors
- Water heater
- Wiring
- Storm windows and doors
Publication 530 says the amount added is the actual cost, including material and labor but not the owner's own labor. It says homeowners should keep receipts and similar evidence of improvements.
Is a Utility Rebate Taxable Income?
IRS Publications 525 and 530, for 2025 returns, say a public utility's energy conservation subsidy is left out of income and reduces the home's basis.
IRS Publication 525 says a taxpayer can exclude from gross income any subsidy public utilities provide, directly or indirectly, for buying or installing an energy conservation measure for a dwelling unit. Publication 530 says the homeowner must reduce the basis of the home by the value of that subsidy.
Both describe an energy conservation measure as an installation or modification primarily designed to reduce consumption of electricity or natural gas, or to improve the management of energy demand. Those passages name public utilities only. To see which utility programs may fit a household, use the eligibility check.
Have the Federal Home Energy Tax Credits Ended?
Yes. The federal energy efficient home improvement credit and residential clean energy credit ended after December 31, 2025, according to IRS Publication 530 (2025).
Publication 530 says the residential clean energy credit ended for expenditures made after December 31, 2025, and the energy efficient home improvement credit ended for property placed in service after that date. Both credits ended, and the publication, written for 2025 returns, refers homeowners who made energy saving improvements in 2025 to a home in the United States to the Instructions for Form 5695. DuloCore's page on the federal home energy tax credits that ended has the dates for each ended credit.
Does California Have a State Tax Credit for Home Energy Upgrades?
For tax year 2025, the Franchise Tax Board's credits page and Schedule P credit table list no current credit for home energy improvements.
The Franchise Tax Board's Personal Credits page points to the Credit Table in its 2025 Instructions for Schedule P (540) for a full list of available tax credits. No entry under its Current Credits heading is for home energy improvements. Entries named Energy Conservation and Solar Energy appear only under its heading for repealed credits with carryover provisions. This page doesn't cover California's own deduction rules.
Property tax is separate. The State Board of Equalization's Active Solar Energy System Exclusion page describes a property tax incentive, not an income tax deduction. It says an installed active solar energy system isn't assessed, so the existing assessment will not increase. The page calls this a new construction exclusion, not an exemption. Solar swimming pool heaters, hot tub heaters, passive energy systems and wind energy systems aren't included. The page says the sunset date was extended through the 2025-26 fiscal year and the statute is now scheduled to sunset on January 1, 2027.
Frequently Asked Questions
Are Home Repairs Tax Deductible?
No. IRS Publication 530 (2025) says a homeowner can't deduct repair costs and generally can't add them to the basis of the home.
It says repairs done as part of an extensive remodeling or restoration are considered improvements and added to basis.
Which Home Improvements Count for the Medical Expense Deduction?
Improvements whose main purpose is medical care can count, reduced by any increase in the home's value, according to IRS Publication 502.
IRS Publication 502, the edition for 2025 returns, says the care must be for the taxpayer, a spouse or a dependent. It lists entrance ramps, wider doorways and grab bars among improvements that accommodate a home to a disabled condition and don't usually increase its value. Only reasonable costs count, and only medical expenses above 7.5% of adjusted gross income are deductible on Schedule A.
Is Home Improvement Loan Interest Deductible?
It can be. Publication 530 (2025) says the loan must be secured by a main or second home, and a home improvement loan can qualify.
It adds a caution: the interest is deductible only to the extent the loan proceeds were used to buy, build or substantially improve the home.
Planning energy work? Estimate rebates for your ZIP code with the free rebate calculator.