As a real estate expert, I often work with homeowners who are not just looking to enhance their living spaces but also want to make smart financial decisions. One of the best ways to add value to your home while saving money is through tax-deductible home improvements.

For 2025, there are several key home improvement projects that may qualify for tax deductions or credits, ranging from energy-efficient upgrades to medically necessary renovations. If you’re planning updates to your property, here’s what you need to know to make the most of these tax benefits.

Energy-Efficient Home Upgrades

Investing in energy-efficient improvements can reduce your utility costs and make you eligible for significant tax credits. Some of the most impactful upgrades include:

• Windows and Skylights: Replacing old windows with energy-efficient models can qualify you for a tax credit of up to $600. Be sure to choose products that meet the ENERGY STAR Most Efficient standards.

• Biomass Stoves: If you install a biomass stove with a thermal efficiency rating of at least 75%, you may be eligible for a tax credit of up to $2,000. These stoves use renewable materials like wood pellets, offering an eco-friendly heating solution.

• Central Air Conditioners: Upgrading to an energy-efficient central air system can yield a tax credit of up to $600. Additionally, if you need to upgrade your electrical system to support new energy-efficient appliances, panelboards with a capacity of 200 amps or more may also qualify.

• Home Energy Audits: Hiring a certified professional to conduct a home energy audit could get you a $150 tax credit. The audit should provide a detailed report outlining recommended energy-saving improvements.

Clean Energy Tax Credits

For homeowners looking to go green, investing in clean energy solutions can lead to even greater tax savings:

• Solar Panels: Installing solar panels allows you to claim a tax credit of up to 30% of the installation cost. This investment not only lowers your energy bills but also contributes to a more sustainable future.

• Geothermal Heat Pumps: These systems use the earth’s natural energy to regulate your home’s temperature and are eligible for a 30% federal tax credit.

• Battery Storage Technology: If you install a battery storage system with at least three kilowatt-hours of capacity, you may be able to claim the 30% tax credit. This is an excellent way to ensure energy resilience for your home.

Historic Home Renovations

Owning a historic home is a privilege, and preserving its character comes with financial benefits. The federal government offers tax incentives for certain rehabilitation projects:

• Qualified Rehabilitation Expenditures: If your home is a certified historic structure, you may qualify for a 20% tax credit on renovations that maintain its historic integrity. Consulting with preservation specialists can help ensure your project meets the necessary requirements.

Medically Necessary Home Modifications

Some home improvements made for medical reasons can be tax-deductible as medical expenses. If you or a family member has specific accessibility needs, consider these potential deductions:

• Accessibility Upgrades: Adding ramps, stair lifts, or widening doorways for medical purposes may qualify as deductible medical expenses. Be sure to keep detailed records and consult a tax professional to determine eligibility.

Home improvements can do more than enhance your living space—they can also provide significant tax savings when planned strategically. Whether you’re investing in energy efficiency, clean energy, historic preservation, or medically necessary modifications, there are numerous opportunities to maximize deductions and credits.

Before making any major renovations, it’s always best to consult a tax professional to ensure your projects align with IRS guidelines. Taking advantage of these tax benefits can help you boost your home’s value while making financially savvy decisions.

For expert guidance on buying or selling a home in Palos Verdes and the surrounding areas, contact Suzanne Dyer or visit suzannedyer.com. CA DRE license #01054310.