If you're planning to renovate your home or build a new one in Utah, it’s smart to ask how those expenses might affect your taxes. Tax deductions and credits aren’t always straightforward, but when you’re making a major investment, the details matter. From energy-efficient upgrades to multigenerational suites, certain home improvements may (or may not) qualify for federal tax credits or deductions. In this article, we discuss tax deductions and benefits at both the federal and state levels for building and remodeling. 

Here's what you can expect in this blog:

• Utah State Tax Benefits
• Primary Residence Exemption
• Utah Taxpayer Credit
• Energy Efficiency Rebates
• County Considerations
• Federal Tax Credits
• New Home Construction
• Renovation Costs
• Deductible Home Improvements
• Capital Gains
• Multigenerational Homes
• Qualifying Expenses
• Building Tax Benefits
• Deductions When Buying

Utah State Tax Benefits

Primary Residence Exemption

Utah offers one of the most generous property tax breaks in the country. If the home is your primary residence, 45% of its taxable value is exempt.

Utah Taxpayer Credit

Instead of itemized state deductions, Utah uses a credit-based system. The Utah Taxpayer Credit reduces your state tax liability based on federal deductions, income, and dependents. While it phases out at higher income levels, many homeowners still benefit from this structure.

Energy Efficiency Rebates

In addition to federal credits, Utah utilities offer cash-back programs for energy-conscious construction.

• Rocky Mountain Power's Wattsmart: Rebates for high-efficiency HVAC, insulation, and lighting

• Dominion Energy’s ThermWise: Incentives for gas appliances, smart thermostats, and weatherization

These rebates stack with federal tax credits and help offset initial build costs. If you're considering building or remodeling, it's worth looking into them.

COUNTY Tax Considerations

In Utah, property taxes are assessed as of January 1 each year. If your home is under construction on that date, your improvements may not be fully reflected until the following tax cycle. That timing could result in a lower first-year property tax bill.

Rates also vary by region. Property taxes in different counties in Utah differ in structure and effective rate. It’s smart to confirm expectations with your builder or local assessor’s office early in the process.

Federal Tax Credits for New Homes in 2026

If you’re planning to build a new home in Utah by June 30, 2026, there’s good news. The federal government has incentives for energy-efficient construction through the Inflation Reduction Act. 

New Home Construction 

What should you know about new home construction tax credits? The Energy Efficient Home Credit offers up to $5,000 in tax credits for homes that meet specific performance standards. To qualify, your new home must be certified under the ENERGY STAR or Zero Energy Ready Home programs and built by a qualified contractor.

While this credit is typically claimed by the builder, your design choices, from HVAC systems to insulation, directly influence eligibility. Working with a builder who understands these programs can help you build smarter from day one.

Can You Write Off Renovation Costs?

Most home renovations aren't deductible right away, but some exceptions apply. Even if your project doesn't offer a short-term tax benefit, it may reduce your tax liability when you sell.

What Home Improvements Are Deductible?

The IRS distinguishes between repairs and capital improvements. Repairs maintain a property’s condition. Capital improvements add value, extend a home's lifespan, or adapt it to new uses.

Common capital improvements include:

• Kitchen and bathroom remodels

• Room additions or layout changes

• Roof replacements

• Major system upgrades (HVAC, plumbing, electrical)

• Accessibility improvements

These costs aren’t deductible in the year they’re made but do increase your home’s cost basis, reducing future capital gains taxes.

Some projects may qualify for current-year tax deductions:

• Medical renovations for accessibility

• Home office improvements 

• Energy efficiency upgrades like solar panels, insulation, or high-efficiency windows

In short, not all improvements offer immediate tax benefits, but many pay off in the long term. Capital improvements increase the value of your home and can reduce the taxes owed when you sell. Meanwhile, select upgrades tied to health, energy savings, or business use may qualify for deductions in the same year. Knowing which category your project falls into helps you plan both for the design and for the return on your investment.

 

Let's talk about capital gains a little bit more. When you sell your home, you pay capital gains tax on the profit, which is the difference between what you paid and what you sell it for. Capital improvements increase your cost basis, which reduces the taxable gain.

Improvements that qualify include:

• Additions

• Structural remodels

• Major landscaping

• Permanent systems or fixtures

If you’re investing in your property now, keeping detailed records will help protect your return later. The cost of a custom home or luxury home remodel isn't a small one, so keeping your records in order can save you on taxes later. 

Multigenerational Home Renovation Tax Credit

Multigenerational living is rising across Utah, particularly in areas like Heber, Midway, and Draper. Federal programs in the US have not yet caught up, but there are many lifestyle benefits to multigenerational living. 

Why not?

US tax law currently does not have anything specifically for multigenerational living, but our northern neighbor does. The current laws tend to benefit younger families, but even without tax benefits, real estate is an excellent investment for older generations. 

While currently Canada has better tax benefits, similar credits are expected to expand across the U.S. as demand grows for aging-in-place solutions and multigenerational housing.

Tax Benefits When Building a Home

We've talked about tax credits, but now let's talk about deductions when building. While you can’t deduct the full cost of constructing a new home, several components of the financing and tax structure can work in your favor if planned strategically.

Various write-off opportunities:

• Construction loan interest 

• Mortgage interest 

• Property taxes 

Let's dig deeper. Even though the cost of building a home isn’t deductible, related expenses like interest and property taxes can offer significant savings. Construction loan interest, mortgage interest, and itemized property taxes all fall under existing IRS deductions. With the new $40,000 SALT cap taking effect, Utah homeowners with high-value properties stand to benefit even more. Strategic planning ensures your home pays off now and in the future.

Tax Deductions When Buying a Home

If you're purchasing a newly built or recently renovated home, several expenses may be deductible in your first year of ownership. These typically include mortgage interest, property taxes, points paid at closing, and qualifying energy upgrades installed during or after purchase. Utah’s low property tax rates add to the appeal, and if you’re financing your home, early-year deductions tied to your loan structure can offer meaningful savings.

Utah’s Trusted Custom Builder and Remodeler

At E Builders, we understand that luxury construction isn’t just about style; it’s about strategy. Our clients come to us for more than craftsmanship. We know you want a builder who understands how design, materials, layout, and efficiency all contribute to long-term value.

Whether you're considering building or remodeling near the best schools in Utah, or it's later in life and you're wondering if it's a great place to retire, we're the team for the job. If you don't already have a lot picked out and you're hoping to build, consider some of the best gated communities in Utah for your new home. 

Working with E Builders

When you work with our building and remodeling team, you see firsthand how we specialize in full custom homes and high-end remodels throughout Utah’s most desirable neighborhoods. Our process is designed to be smooth and transparent. We work with established trade partners, use premium materials, and manage every detail through industry-leading software. The result is a portfolio of incredible luxury custom homes and remodels. We invite you to check out our cost guide to see what it might cost to renovate or build a new home. 

Contact Us

Contact us today to learn more or to schedule a consultation. We would be honored to discuss your project.