Tax Deductions for Homeowners

Learn About 2025 Income Tax Breaks

There are income tax breaks for owning a home that every homeowner should be aware of and consider. If you qualify for these deductions, you'll save money (sometimes a substantial amount) on your income taxes. But it's important to be aware that tax laws can be tough to navigate. We cover some of the tax breaks in this article, but you'll want to talk with your tax preparer or financial advisor about these homeowner tax deductions to verify you qualify for them.

Understanding Standardized and Itemized Income Tax Deductions

Before delving too deep into tax deductions for homeowners, you'll need to consider standard and itemized deductions. Tax deductions related to homeownership expenses must be itemized, but the standard deduction—which isn't itemized or related to homeownership status—may allow you to deduct more. Standard deductions for tax year 2025 are:

• Single or married filing separately: $15,750
• Head of household: $23,650
• Married filing jointly or qualifying surviving spouse: $31,500

If the sum of your itemized deductions is less than any of those amounts, taking the standard deduction will likely be best for you. Regardless, let's discuss some of the most popular and used tax breaks for homeowners.

Top Tax Breaks for Homeowners

If you choose to itemize deductions, there are some you'll want to include as a homeowner. These deductions can add up and help you save money on your taxes (if they are higher than your corresponding standard deduction).

Mortgage Interest Tax Deduction

Part of your monthly mortgage payment covers your interest due each month. The IRS allows you to deduct your mortgage interest payments up to a certain limit. For example, you can deduct interest on the first $750,000 of a mortgage opened after December 15, 2017, unless your filing status is married filing separately (in which case you can deduct interest on the first $375,000). You can also only claim deductions on your primary home, where you live most of the time. You may also be able to deduct interest on second homes in some situations, especially if they are income-producing investments. A tax professional can explain those conditions for you.

Property Tax Deduction

You can usually deduct the costs of local and state property taxes from your federal taxes, but IRS rules limit the amount you can deduct. During tax season 2025 (when filing for tax year 2024), married couples filing separately could deduct up to $5,000, while everyone else could deduct up to $10,000. These limits, which will be four times as high beginning with tax season 2026 (when filing for tax year 2025), include potential deductions for state and local income and sales taxes paid during the tax year.

Deductions for Home Equity Loans and Lines of Credit

In some cases, you may be able to claim a deduction for interest paid on home equity loans and lines of credit. But it's important to note that money borrowed against your home's equity must go to buy, build, or upgrade your home. You won't be able to deduct interest from a home equity loan if you used it to buy a car or pay college tuition.

Deductions for Certain Home Improvements

Some home improvements allow you to deduct money from your taxes, too. For example, improvements to accommodate a family member with a medical disability may qualify. These upgrades may include building entrance and exit ramps, adding grab handles, and widening hallways.

Other Tax Deductions for Homeowners

Homeowners may have other deduction options, as well. For example, you may be able to claim deductions for:

• A home office when self-employed
• Expenses for rental space if you rent out part of your home
• Discount points if you bought any for your mortgage

Some homeowners may also qualify for a homestead tax exemption. The rules for these tax exemptions for homeowners can be complicated, so ask your tax professional to see if you qualify.

Can You Exclude Capital Gains Taxes When You Sell a Home?

When you sell your home, you can qualify to exclude up to $250,000 of capital gains from being taxable when you file as an individual. A married couple filing jointly can exclude up to $500,000 of capital gains when they sell a home. To qualify, you'll need to meet the minimum requirements for the length of time you've owned the home, as well as the length of time you've used it as your primary residence.

You may also be able to deduct the cost of substantial home improvements from your capital gains. The improvements can include:

• The addition of a room, garage, patio, or deck
• The cost of installing new windows, doors, siding, and a roof
• Upgrading heating and cooling systems, electrical systems, and plumbing

To deduct these costs, you'll need to keep records of all improvements that meet the government's standards.

Are There Tax Credits for Energy-Saving Home Improvements?

There are residential, energy-efficient property tax credits you may qualify for. These credits can cover improvements, such as installing energy-efficient windows and doors, roofs, and insulation. Upgrading to energy-efficient heating and cooling systems or an efficient water heater can also qualify. There are credits for installing alternative energy systems, like solar panels, too. Learn more about solar power.

To claim these tax credits, you'll need to have made a qualifying improvement during a defined tax year. To learn more, see these IRS questions and answers.

What Homeowning Expenses Are Not Tax Deductible?

Many costs of owning a home aren't tax deductible. Some of these include:

• The costs of routine maintenance and repairs that don't substantially improve your home
• Homeowners insurance
• Utility and internet bills
• Homeowners association (HOA) fees or condominium fees
• Down payments
• Closing costs

There may be others, so be sure to talk with your tax advisor about them.

Final Thoughts on Tax Benefits for Homeowners

When you own a home, you have the opportunity to take advantage and save money with numerous income tax deductions for homeowners. It's worth talking with your tax advisor about them so you can save some money. The IRS has a lot of rules for how the deductions work, and you'll want a professional to help you make sure you're following and understanding them. If you don't own a home yet but are interested in how home ownership can save you money and help you achieve the American Dream while also helping you hit your financial goals, get prequalified today.

* Freedom Mortgage Corporation is not a financial advisor. The ideas outlined above are for informational purposes only, are not intended as investment or financial advice, and should not be construed as such. Consult a financial advisor before making important personal financial decisions and consult a tax advisor regarding tax implications and the deductibility of mortgage interest and charges.