Sales tax deduction for a home renovation in Washington (2026):
the IRS rules for itemizers
CAN I DEDUCT SALES TAX ON A HOME RENOVATION?
If you itemize on Schedule A, the IRS lets you deduct state and local general sales taxes instead of income taxes. The Washington Department of Revenue says Washington "does not currently have an individual income tax," so this option matters here. On top of the IRS table amount, you may add sales tax paid on "a substantial addition to or major renovation of a home," but only if the rate was the general sales tax rate and one of three conditions applies. The total state and local tax deduction is capped at $40,400 for 2026 ($20,200 if married filing separately).
How the sales tax deduction works
- Itemizers only. The deduction is on Schedule A, so it only helps if you itemize instead of taking the standard deduction.
- Sales tax or income tax, not both. The 2025 Schedule A instructions say you may deduct state and local general sales taxes instead of income taxes: "You can't deduct both."
- Two ways to figure it. Use your actual expenses, keeping "your actual receipts showing general sales taxes paid," or the IRS optional sales tax tables.
- Major purchases on top of the table. The worksheet lets table users add sales tax on certain major items, including "a home (including a mobile home or prefabricated home) or substantial addition to or major renovation of a home."
The conditions for a renovation
The 2025 Schedule A instructions allow the renovation's sales tax "only if the tax rate was the same as the general sales tax rate," and at least one of these applies:
| # | Condition (IRS Schedule A instructions) |
|---|---|
| 1 | You purchased the materials to build a home or substantial addition or to perform a major renovation |
| 2 | Your state or locality imposes a general sales tax directly on the sale of a home |
| 3 | Under state law, your contractor is your agent in the construction, and the contract authorizes the contractor to act in your name |
Keep the invoices and receipts that show the sales tax you paid, and ask a tax professional which condition, if any, fits your project.
The state and local tax cap
| Tax year | Limit | Married filing separately | Reduced if modified AGI is over |
|---|---|---|---|
| 2025 | $40,000 | $20,000 | $500,000 ($250,000 MFS) |
| 2026 | $40,400 | $20,200 | $505,000 ($252,500 MFS) |
The cap applies to the total on Schedule A line 5d: sales or income taxes plus real estate and personal property taxes.
How Washington sales tax applies to renovations
- Labor is taxed too. The Washington Department of Revenue says construction for a homeowner is subject to retail sales tax on the gross contract price, labor included.
- The job site sets the rate. 10.55% in Seattle, 10.40% in Kent and 10.30% in Bellevue for October–December 2026. Rates by city: sales tax on home repairs.
- Example. On a $60,000 renovation in Seattle, sales tax at 10.55% is $6,330 (our calculation). Whether you can add it to your deduction depends on the IRS conditions above.
Frequently asked questions
Can I deduct sales tax on a home renovation?
Possibly, if you itemize and choose the sales tax deduction. The IRS lets you add sales tax on a substantial addition or major renovation only at the general sales tax rate and if one of three conditions in the Schedule A instructions applies.
Why does the sales tax deduction matter in Washington?
The Department of Revenue says Washington doesn't currently have an individual income tax, so itemizers have no state income tax to deduct; the IRS lets them deduct general sales taxes instead. DOR says a 9.9% income tax for adjusted gross income above $1 million begins in 2028 (Senate Bill 6346).
What is the SALT deduction limit for 2026?
$40,400, or $20,200 if married filing separately, reduced if modified AGI is more than $505,000 ($252,500 if married filing separately), according to the IRS.
Do I need receipts to deduct sales tax?
To use actual expenses, yes: the IRS says you must keep your actual receipts. You can also use the IRS optional sales tax tables and add tax on qualifying major purchases.
Does Washington charge sales tax on contractor labor?
Yes. The Department of Revenue says construction for a homeowner is taxed on the gross contract price, labor included, at the rate where the work is done.
Sources
- IRS — Instructions for Schedule A (Form 1040), 2025
- IRS — Correction to state and local income tax deduction amount in the 2026 Form 1040-ES (March 16, 2026)
- Washington Department of Revenue — Income tax
- Washington Department of Revenue — Custom construction
- Washington Department of Revenue — Local sales and use tax rates, Quarter 4 2026
All sources accessed November 11, 2026, except DOR rates (checked October 16, 2026). The 2026 Schedule A instructions are usually released in December–January; we'll recheck this page then.
This guide summarizes IRS and Washington Department of Revenue information. It is not tax advice. Check with a tax professional about your situation. See our disclosure and disclaimer.