5 Tax Deductions For Homeowners | Bankrate (2024)

Buying a home can be a good way to build wealth, but that doesn’t mean managing a mortgage is easy. Between monthly payments, maintenance and unexpected repairs, the costs of homeownership can really add up. Fortunately, there are tax deductions for homeowners that can help to ease the financial burden a bit.

Tax benefits of owning a home

Good news: the IRS offers several tax breaks for homeowners, from deductions for the interest on your mortgage to credits if you improve your home’s energy efficiency in certain ways. The key is that you need to qualify — and be able to prove it.

In some cases, this is easy. Your mortgage lender should provide documentation showing what you’ve paid in interest over the course of the year, for example. In other instances, showing that you’re entitled to a specific tax break can be more challenging, but the extra legwork could be worth it if it saves you money. Here are some of the tax deductions all homeowners should know about.

5 tax deductions for homeowners

1. Mortgage interest

Many U.S. homeowners can deduct what they paid in mortgage interest when they file their taxes each year. (The rule is that you can deduct a home mortgage’s interest on the first $750,000 of debt, or $375,000 if you’re married and filing separately.) You’ll need to itemize your deductions on Schedule A (Form 1040). The key factor that determines whether you can deduct your mortgage interest is whether your itemized deductions exceed your standard deduction —it’s smart to consult with a tax professional to be sure.

There are some caps on mortgage interest deductions for mortgages taken out after 1987, especially if you’re in a high-earning household. Use this flowchart from the IRS to figure out how much of your mortgage interest you can deduct.

2. Mortgage points

If you bought points on your mortgage, that entitles you to similar tax deductions, because the IRS sees it as mortgage interest. In many cases, you’ll need to deduct them over the course of your loan term. But if you meet certain qualifications, you might be able to deduct the full amount of points in a single tax year on your Schedule A.

3. Interest on home equity loans or lines of credit

If you took out a home equity loan or home equity line of credit (HELOC) prior to 2018, you might be able to deduct the interest you paid. To qualify, the money must have been used to “buy, build or substantially improve” the home. This deduction doesn’t apply to home equity loans or HELOCs taken out between 2018 and 2025, per the IRS.

4. Property taxes

Some of the least welcome expenses of homeownership come from the amount you owe state and local tax authorities. Fortunately, the IRS does offer tax deductions on income, sales and property taxes for most homeowners of up to $10,000 total (or $5,000 if married and filing separately). For property taxes to be deductible, your total itemized deductions on Schedule A must exceed the standard deduction. Note that this does not include transfer taxes, homeowners association fees or utility service charges.

5. Residential energy credits

If you have installed alternative energy equipment to make your home more efficient, such as solar panels, you might be able to claim a residential energy credit for it. You can usually claim a credit for things like:

• Solar electric, fuel cell and biomass property
• Solar water heaters
• Geothermal heat pumps
• Small wind turbines

The amount of credit you’ll get depends on when the property was purchased or improvement was installed:

• 2017–2019: 30 percent
• 2020–2022: 26 percent
• 2023: 22 percent

These credits are expected to end after 2023, so if you’re thinking about going green at home, now is a good time to do so.

What home expenses are not deductible?

If you are self-employed and your home is your principal place of business, you may be able to claim a home-office deduction. But this option is generally not available for typical W-2 employees. Here are a few other expenses that are non-deductible for typical homeowners:

• Mortgage insurance premiums (these used to be deductible, but that expired in 2022)
• Other insurance premiums, such as home, fire or flood insurance
• Mortgage principal
• Utility costs
• Homeowners association fees
• Down payment costs
• Home repairs

FAQs

• To a large extent, that depends on your home and your income level. It can also depend on whether you are self-employed and use your home for business purposes. Some of the more commonly applicable tax breaks for homeowners include deductions for mortgage interest and mortgage points.
  

• Home improvements are typically not tax-deductible. That said, if you take out a home equity loan after 2025 and use it to improve your home, you may be able to deduct the interest on that loan. And some energy-efficient home improvements are eligible for tax credits.
  

• No, it’s not — in fact, no insurance-premium costs for your home can currently be deducted. Even private mortgage insurance premiums, which used to be tax-deductible, no longer are as of 2022. However, the situation may be different for self-employed homeowners who use their home for business purposes and are able to take a home-office deduction.