yesunless you paid the builder with after tax dollar; $10K that you paid to the builder is part of your income that you need to report on your 1040.so, the amt of refund of $10k needs to be reported on your return as part of your income on 1040
Note: however, when you make a home improvement,not repairs, such as installing central air conditioning, adding a sunroom or replacing the roof, you can't deduct the cost in the year you spend the money. But if you keep track of those expenses, they may help you reduce your taxes in the year you sell your house since these are capital improvements and they increase the value of the home, you can add the cost to the basis in your home. The greater your basis, the less profit you'll receive when you sell your home.
You'll need to keep track of all those home improvement expenses.