7 Tax Breaks for Homeowners

Standard vs. Itemized Tax Deductions

One thing to remember: The homeowner tax deductions shown below are only available for taxpayers who itemize deductions on their tax returns. Itemizing means listing individual tax deductions instead of claiming the standard deduction, which is a preset deduction anyone can use with no additional documentation or math required.

Standard deductions are fairly robust. As a result, a majority of taxpayers choose the standard deduction over itemizing. Here are the standard deductions for the 2025 tax year.

Source: IRS

If you choose the standard deduction over itemizing, you can't use the homeowner deductions noted in the next section—though you can take advantage of tax credits and the home office deduction for self-employed people, if you're eligible.

Learn more: What Can You Deduct on Your Taxes?

7 Tax Deductions and Breaks for Homeowners

If you're eligible, you may be able to take advantage of a number of tax deductions and credits that can lower your tax bill substantially. Here are seven to consider as you're mapping out your home budget.

1. Mortgage Interest

You can deduct mortgage interest on up to $750,000 of mortgage debt. This limit applies to both single and married taxpayers filing jointly: Married people filing separately may each deduct the interest on up to $375,000 of mortgage debt.

The mortgage interest deduction is one of the largest and longest-running homeowner tax deductions available. For quick reference, the first 12 months of interest on a $750,000 mortgage at 6.5% is $48,503. You can use this mortgage calculator to estimate your annual interest payments. Although interest charges will decrease as you pay your mortgage down, this deduction is available every year your loan exists: 30 years on a 30-year mortgage.

The mortgage interest deduction applies only to interest. Any part of your mortgage payment that goes toward paying your principal loan balance, property taxes or home insurance is not deductible. At the end of the year, your lender will send you Form 1098, which summarizes the amount of interest you paid (and reports it to the IRS). For more information on the mortgage interest deduction, read IRS Publication 936, Home Mortgage Interest Deduction.

Learn more: Can I Deduct Mortgage Interest on My Taxes?

2. Discount Points

When you take out a home loan, you may have the option of paying discount points upfront to lower your interest rate. Under some circumstances, discount points you pay when you purchase a home may be deductible in the year you make the home purchase. The deduction for discount points on a refinance must be spread out over the life of the loan.

Learn more: Are Mortgage Points Worth It?

3. Property Taxes

State and local property taxes are deductible on your federal tax return if you itemize your deductions. However, you can only deduct a total of $10,000 for state and local property tax, income tax and sales tax combined.

4. Mortgage Tax Credit

The mortgage credit certificate program is designed to help low-income, first-time homebuyers afford homeownership. This mortgage tax credit isn't a tax deduction. Instead, qualified homebuyers claim a tax credit that reduces their tax bills dollar for dollar up to $2,000.

To participate, you need to obtain a mortgage credit certificate from a state or local government agency before you purchase a home. Contact your state or local housing finance agency for more information. The amount of the credit varies and you must subtract any credit you receive from your mortgage interest deduction. Read IRS Publication 530: Tax Information for Homeowners to learn more.

5. Interest on Home Equity Loans

Interest on home equity loans and home equity lines of credit (HELOCs) is only deductible if you use the money to buy, build or substantially improve your home. If you took out a home equity loan to consolidate bills or pay for college, for example, the interest is not deductible. If your home equity loan's interest is deductible, your loan balance counts toward the $750,000 mortgage interest deduction loan limit.

Learn more: Is HELOC Interest Tax Deductible?

6. Some Home Improvement Expenses

Although most home improvement expenses aren't tax deductible, there are some exceptions for medically necessary and energy efficient upgrades. Here are a few additional details.

Medically necessary improvements: In some cases, the costs of medically necessary home improvements, such as adding an accessible entrance or installing support bars, may be deductible as medical expenses. To deduct medical expenses on your income tax return, medical expenses for the year must total at least 7.5% of your income. Then, you can only deduct the portion of your expenses that exceeds the 7.5% threshold.

Energy-efficient improvements: The energy-efficient home improvement credit provides up to $3,200 in tax credits, which you can deduct dollar for dollar from your tax bill. Here's how maximum credits break down:

• $1,200 for eligible energy-efficient property costs and home improvements, such as exterior doors, windows or skylights, or home energy audits
• $2,000 per year for qualified heat pumps, water heaters, biomass stoves or biomass boilers

Get additional details on the energy efficient home improvement credit from the IRS.

7. Home Office Expenses

The Tax Cuts and Jobs Act of 2017 took away the home office deduction for employees. But if you're self-employed, you may be able to deduct eligible home office expenses if you maintain a dedicated office in your home and maintain it as your principal place of business.

What Homeowner Expenses Are Not Tax Deductible?

Not all home-related expenses are tax deductible. Here are a few examples of the many homeowner expenses that are not deductible on your federal taxes:

• Home insurance
• Home repairs
• Homeowner association fees
• Title insurance
• Utilities (electricity, gas, water or internet)
• Domestic services (housekeeping or lawn care services, for example)
• Depreciation
• Principal payments
• Closing or settlement costs
• Down payments, forfeited deposits and earnest money

Some of these non-deductible expenses may be partially deductible if you're self-employed and deduct home office expenses from your business income. Otherwise, they don't add to your itemized deductions.

Give Yourself a (Tax) Break

Tax planning isn't the only tool that can help you lower the costs of homeownership. Working on your credit may help you secure a more favorable interest rate on your mortgage. If you're planning to buy a home in the near future, you may want to check your credit report and score on Experian now. You'll get a clearer picture of your status and may find ways to improve your credit before you start applying for loans.

If you aren't sure how available tax breaks will affect your tax situation, you may want to work with a tax advisor. A qualified tax pro can help you determine whether you qualify for homeowner tax deductions and credits, and how much you might save by claiming them.