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The costs of home improvements are not deductible on the federal tax return, but are added to the cost basis of the home. You will use the cost basis to compute a gain or loss on the home at the time it is sold.

Per IRS Publication 523 Selling Your Home, on page 8:

Improvements

Improvements add to the value of your home, prolong its useful life, or adapt it to new uses. You add the cost of additions and improvements to the basis of your property.

For some examples of improvements, see the chart on page 9 of the publication.

If the home was used for business purposes, see IRS Publication 587 Business Use of Your Home (Including Use by Daycare Providers) for information on depreciation of the home.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.


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