With tax breaks for mortgage interest, mortgage insurance, and SALT deductions, homeowners can reduce their tax bill significantly.
Owning a home is an expensive endeavor. You’ll have to cover monthly mortgage payments, maintenance and repair expenses, and remodeling bills, among the many costs involved. Fortunately, you can ease this financial pressure by taking advantage of tax deductions and credits if you qualify.
While we’re not tax experts (and you should always consult a licensed tax pro before filing) here are the best potential tax breaks as a homeowner.
The Value of Tax Benefits
It certainly may not be the biggest reason why people purchase property and choose homeownership. But tax benefits can add up to a meaningful perk over the many years you own your home.
”Ongoing tax breaks can put real money back in your family’s pocket each year,” says Steven Glick, director of mortgage sales for Ziffy. “If I had to rank the top benefits of homeownership, I would place tax benefits just behind the ability to create long-term wealth and stability, and enjoying lifestyle and control over your space.”
While tax breaks shouldn’t be the only reason to buy a home, they can easily save you thousands every year, notes Eric Chebil, managing broker and founder of homeownership education platform Cher.
“For example, imagine you have a $600,000 mortgage loan at a typical interest rate. Between deductions on mortgage interest, property taxes, and possibly mortgage insurance, it’s not uncommon to see $12,000 to $20,000 in deductible expenses. Depending on your tax bracket, that could translate into several thousand dollars in annual tax savings,” he says.
Imagine you have a $600,000 mortgage loan at a typical interest rate. Between deductions on mortgage interest, property taxes, and possibly mortgage insurance, it’s not uncommon to see $12,000 to $20,000 in deductible expenses.
Keep in mind that you have two tax deduction paths to choose from. You can opt for the standard deduction, which in tax year 2026 will be $16,100 for single filers, $24,150 for heads of household, or $32,200 for married couples filing jointly. Or, you can itemize your collective deductions, mortgage interest, property taxes, and home office expenses. Itemizing means you’ll need to keep good records and substantiate why you qualify for each of these itemized tax deductions when you file your tax return. It makes more sense to itemize your deductions when the total sum of these deductions exceeds the standard deduction amount.
11 Tax Benefits You May Qualify for as a Homeowner
For many homeowners, choosing to itemize deductions results in a greater tax benefit. So let’s take a look at each of these possible tax breaks and how to qualify.
1. Mortgage Interest Deduction
If you itemize, you can deduct any mortgage interest you pay on your primary residence as well as one additional qualified residence (such as a vacation home). But your loans must be secured by the property, and the funds have to be used to purchase, build, or substantially improve that property.
“Under current rules, mortgage interest is deductible on up to $750,000 of acquisition debt – $375,000 if married filing separately – for newer loans, with a higher limit for some older pre-2017 mortgages,” notes Glick. “For most middle-income households, this deduction is most powerful in the first 10 to 15 years of the mortgage, when a bigger share of every payment is spent on interest.”
Martin Orefice, CEO of Rent To Own Labs, believes this deduction is probably the most important tax benefit for the average homeowner.
“For most homeowners, it’ll be as simple as claiming the deduction on your taxes. But if you have multiple properties, it gets more complicated,” he says.
2. Home Equity or HELOC Interest Deduction
You may be able to deduct interest on a HELOC or home equity loan, provided the loan is secured by your home and the funds are used to purchase, build, or substantially improve that same property.
Let’s say you use a HELOC to remodel your kitchen, add a bedroom, or replace a roof; if so, that interest can count as deductible mortgage interest – subject to the same $750,000 cap on acquisition debt. But if you use HELOC funds to pay college expenses or pay down your credit cards, that interest is not deductible.
“Home equity lenders don’t always explain this benefit clearly, so it’s important to keep sufficient records and receipts,” says Chebil.
3. Property Tax Deduction
Property taxes on your residence are a portion of the broader state and local taxes (SALT) deduction, which also includes state income or general sales tax. Starting with the 2017 Tax Cuts and Jobs Act, SALT deductions have been capped at $10,000 annually for most filers. Beginning in 2025, the SALT cap was raised to $40,000 for most households, with phase-outs for higher-income taxpayers.
“Imagine you pay $4,000 in property tax and $6,000 in state income tax. That means you are under both the old $10,000 cap and the new higher 2025 cap,” Glick notes. “In everyday terms, if your total property and state taxes are well under $40,000, you can usually deduct the full amount, so long as itemized deductions beat the standard deduction.”
In everyday terms, if your total property and state taxes are well under $40,000, you can usually deduct the full amount, so long as itemized deductions beat the standard deduction.
4. Deduction for Mortgage Insurance Premiums
If you made a low down payment on your home, you may pay mortgage insurance premiums. Recently, you weren’t allowed to deduct for mortgage insurance. But in 2025, Congress passed new legislation to reinstate the deduction and make it permanent. However, the effective date kicks in beginning with the 2026 tax year.
To be eligible, you need to be under the income phase-out thresholds; while the IRS has not yet finalized the exact thresholds, prior versions of the deduction phased out for adjusted gross incomes roughly between $100,000 and $110,000.
5. Capital Gains Exclusion on Primary Residence Sale
This is one of the most valuable homeowner tax perks. That’s because, if you sell your primary residence, you can typically exclude from your taxable income up to $250,000 of gains if you are single or $500,000 of gains if you are married filing jointly. But you must have owned and used your primary residence for at least two out of the last five years prior to the sale, and you must not have used this exclusion on another property in the past two years.
“For many families, this means they can sell a home with a six-figure gain and pay zero federal capital gains tax, or at least significantly reduce it, adds Glick. “It’s a major reason why home equity can be such a tax-efficient form of wealth.”
If you sell your property before meeting the full 2-out-of-5-year requirements, you may still qualify for a partial capital gains exclusion if you experienced a job change, significant health problems, or certain unforeseen circumstances recognized by the IRS. Here, the maximum $250,000/$500,000 exclusion is prorated by how much of the two-year requirement you met.
“The IRS has its own way of prorating this over the long run, based on how long you lived in the house. But it remains one of the biggest advantages of homeownership over the long run,” says Ryann Brier, a licensed real estate agent with City Lights Home Buyers.
6. Home Office Deductions
If you run a small business or work for yourself out of a home office, you may be able to deduct expenses related to that home office. The space must be used regularly and exclusively for your business or trade. That means it must be your principal place of business or a spot where you consistently meet clients, and it cannot serve as a guest room, kids' playroom, or other purpose. Also, you cannot be a W-2 employee who happens to work remotely.
“If you qualify, this deduction allows part of your normal housing expenses to become business expenses, which can significantly offset your self-employment income,” Glick points out.
Eligible filers can choose either the:
Simplified method: Here, the IRS allows you to deduct $5 per square foot, up to 300 square feet, for a maximum of $1,500 annually – with no depreciation and minimal record-keeping.
Actual expense method: This requires calculating what percentage of your home is used for business, from which you can deduct that same percentage of eligible costs, including utilities, homeowners insurance, certain repairs and maintenance, property taxes and mortgage interest, and depreciation on the part of the home used for business.
“The home office deduction has been especially popular in recent years with people working from home, but be aware of the rules,” says Orefice. “If you use a spare bedroom exclusively as an office, that counts; but if it’s also your home gym in a guest room where you have visitors, it does not.”
7. Federal Tax Credits for Energy-Efficient Upgrades
Two large federal credits currently exist, which allow you to directly reduce tax owed dollar-for-dollar. The first is the Energy Efficient Home Improvement Credit (Section 25C), which covers 30% of the cost of qualifying energy-efficient improvements, such as insulation, certain windows/doors, and an efficient HVAC system – with an annual limit that can reach up to $3,200 annually, split across subcategories. The second is the Residential Clean Energy Credit (Section 25D), which is worth 30% of the expense of qualifying clean energy systems, including solar panels, certain battery storage, and some other renewable systems, claimed using IRS Form 5695.
“Energy efficiency is popular right now, and no wonder, as there are tax benefits behind it. This could be your shot to make some big upgrades like new windows or a new HVAC system,” Brier notes.
However, both of these credits are scheduled to end for new installations after December 31, 2025.
8. Depreciation Deductions on Home Portions Used as Rental or for Business
If you rent out a portion of your home or convert it to a full rental, that portion will be treated like any other residential rental property. The building cost (not the land) is depreciated over 27.5 years using straight-line depreciation. Also, a share of operating costs – like insurance, utilities, repairs, and property management fees – can be deducted against rental income. Likewise, if you use the actual expense method for a qualifying home office, you can depreciate that business portion of your home.
“The immediate benefit here is that depreciation often creates a non-cash deduction that reduces taxable rental or business income,” says Glick. “The trade-off is that when your property is sold, that portion of your gain usually faces depreciation recapture – which is taxed differently from the Section 121 primary residence exclusion.”
9. Deductions for Medically Necessary Home Improvements
If you need to install a ramp, add handrails or lifts, install accessible bathrooms, or make other changes to your home primarily for medical reasons, you can treat these expenses as medical costs. The rule is that you can typically deduct a portion of the expense that does not increase your home’s value as a medical expense. Also, your unreimbursed medical expenses combined cannot exceed 7.5% of your adjusted gross income to generate an itemized deduction. Prepare to furnish documentation from physicians and possibly an appraisal to indicate any changes in home value.
“This deduction is niche-specific. So you would want to talk with a tax professional to ensure the improvement meets the IRS requirements for a write-off,” recommends Brier.
10. Casualty or Theft Loss Deductions Related to Federally Declared Disaster Area
If your home was damaged due to a federally declared disaster, like a major flood, wildfire, or hurricane, casualty and theft losses may be deductible. But you must calculate the drop in your property’s fair market value, subtract any insurance reimbursements, and apply certain per-event and adjusted gross income thresholds before you can claim any deduction on Schedule A of your tax return.
“In a catastrophic event, this can be one piece of the financial recovery picture for homeowners whose losses were not fully covered by insurance,” Glick says.
11. Closing-Related Expense Deductions
When you purchase a home, most closing expenses – like lender fees, recording charges, and title fees – are not immediately deductible. But there are two important exceptions to this rule.
First, you may be able to deduct prorated property taxes at closing. If you reimburse the seller for their share of property taxes for the portion of the year you own the home, that portion can generally be deducted as real estate tax – assuming you itemize your deductions.
Second, if you chose to pay for mortgage points when you took out your home loan (with one point typically equating to 1% of your loan amount), these points can often be deducted in full within the year you paid for them. The full rules are outlined in IRS publications 936 and 530. The IRS stipulates that the loan must be secured by your main home, the points are a percentage of the principal, these points are common in your area, and they are clearly listed on your closing statement as points, loan discount, or similar.
“For refinances or loans on a second home, you can usually deduct mortgage points over the life of the loan, not all at once, unless the refinance is just to improve the same property and you meet specific criteria,” Glick continues.
Other Possible Tax Deductions/Benefits
Additional tax perks you may be able to take advantage of include:
State and local property tax rebates, credits, and homestead exemptions. While these are not federal deductions, in some states they can significantly decrease your net property tax bill or provide credits for veterans, seniors, or low-income homeowners.
Mortgage credit certificates. Issued by some local/state housing agencies, these allow qualified homebuyers to claim a direct tax credit for a percentage of their mortgage interest – often 20% to 40% – sometimes in addition to the regular interest deduction allowed. It can be a major benefit for lower- to moderate-income first-time purchasers (best explained in IRS Publication 530).
Relief for forgiven mortgage debt on a principal residence. Some previous laws have permitted particular forgiven mortgage debt – such as in a short sale – to be excluded from income under certain conditions. Be aware that the exact rules have changed over the years, which means this is very case-specific; it’s best to consult with an experienced tax professional to learn if you qualify.
Discover Your Tax Breaks Before You File Taxes
If you’ve determined that itemized deductions offer more advantages than the standard tax deduction, you can likely benefit from several tax breaks available to homeowners. But you’ll need to keep good records, be aware of particular rules, restrictions, and deadlines, and either partner with a skilled tax professional who can make the process easier or manage your home-related taxes yourself – which may involve carefully consulting several IRS publications.
