Buying your first home feels amazing until tax season rolls around and you’re wondering what you can actually write off. The good news? Homeownership comes with some solid tax benefits that can put real money back in your pocket.
Recent changes in 2025 have made things even better for homeowners, especially those in high-tax states. Let’s break down what you need to know without the confusing tax jargon.
Your Biggest Tax Breaks as a New Homeowner
Mortgage Interest Deduction – Your Best Friend
If you’re paying mortgage interest (and let’s be honest, who isn’t?), this deduction is probably your biggest money-saver. You can deduct interest on up to $750,000 of mortgage debt if you’re married filing jointly, or $375,000 if you’re single.
Here’s what makes this sweet: during your first few years as a homeowner, most of your monthly payment goes toward interest rather than principal. That means bigger deductions when you need them most.
If you bought your home before December 15, 2017, you get to use the old, more generous limits – up to $1 million in mortgage debt.
Property Tax Deductions Just Got Better
Property taxes used to be capped at a $10,000 deduction, which hurt homeowners in expensive areas. But recent legislation has temporarily raised the SALT deduction cap to $40,000 per household for tax years 2025 through 2029.
This change is huge for people in states like California, New York, and New Jersey where property taxes can easily exceed the old $10,000 limit. You could save thousands more on your federal taxes.
The Fine Print: What You Can’t Deduct
The IRS is pretty clear about what doesn’t count. You can’t write off:
- Home insurance (including fire, comprehensive, and title insurance)
- Mortgage principal payments (only the interest portion counts)
- Utilities like gas, electricity, or water
- Home repairs (though improvements might qualify differently)
- HOA fees or condo association fees
- Internet and Wi-Fi costs
Special Programs Worth Knowing About
Mortgage Interest Credit for Lower-Income Buyers
If you qualified for a Mortgage Credit Certificate from your state or local government, you might be eligible for the Mortgage Interest Credit. This helps lower-income families afford homeownership by providing a credit (not just a deduction) for part of your mortgage interest.
Home Office Deduction
Working from home? If you’re self-employed and use part of your home exclusively for business, you can deduct those expenses. Employees who work from home cannot claim a home office deduction, but self-employed folks can use either the simplified method ($5 per square foot up to 300 sq ft) or actual expenses.
Energy Efficiency Pays Off
Made your home more energy-efficient? The Residential Clean Energy Credit covers 30% of the cost for solar panels, wind turbines, geothermal heat pumps, and other qualifying improvements. Unlike deductions, credits reduce your tax bill dollar-for-dollar.
Tax Deduction Comparison Table
Deduction Type | 2025 Limits & Rules |
---|---|
Mortgage Interest | Up to $750,000 debt ($375,000 single filers) |
Property Taxes | Up to $40,000 SALT cap (2025-2029), then $10,000 |
Standard Deduction | $15,000 (single), $30,000 (married filing jointly) |
Home Office | $5/sq ft up to 300 sq ft (simplified method) |
Energy Credits | 30% of qualifying improvement costs |
Mortgage Points | Fully deductible in purchase year (primary residence) |
Should You Itemize or Take the Standard Deduction?
For 2025, the standard deduction is $15,000 for single filers and $30,000 for married couples filing jointly. You’ll only benefit from itemizing if your total deductions exceed these amounts.
With the higher SALT cap, more homeowners might find itemizing worthwhile, especially if you have other deductions like medical expenses or charitable contributions.
Keep These Records
Save everything: mortgage interest statements (Form 1098), property tax bills, closing statements, and receipts for qualifying home improvements. The IRS requires documentation for any deductions you claim.
Military and Clergy Benefits
Ministers and members of the uniformed services who receive nontaxable housing allowances can still deduct their real estate taxes and home mortgage interest. This is a nice double benefit worth knowing about.
Frequently Asked Questions
Q: Can I deduct closing costs when I buy a home?
A: Most closing costs aren’t deductible, but you can deduct mortgage interest and certain real estate taxes paid at closing. Other costs get added to your home’s basis.
Q: What if I refinanced my mortgage?
A: You can still deduct the interest, but points paid during refinancing must be deducted over the life of the loan rather than all at once.
Q: Do I need to itemize to claim these deductions? A: Yes, you must itemize your deductions to claim homeowner benefits. If your total itemized deductions don’t exceed the standard deduction, stick with the standard amount.
Getting the most from your homeowner tax benefits doesn’t have to be complicated. Focus on the big-ticket items like mortgage interest and property taxes, keep good records, and consider working with a tax professional if your situation gets complex.
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