Each year, as tax season approaches, I find myself digging through my files and receipts. Like many homeowners, I want to make sure I’m not leaving money on the table. If you own a home, the tax code can feel like it’s written in another language, but hidden within are real savings that can lower your bill. The right credits and deductions for homeowners do not just reward you for your investment—they make owning your own place a little more affordable.
Tax savings for homeowners aren't just hype. They're very real.
I decided to write down seven tax deductions and credits that, in my experience, are commonly missed or misunderstood. Some can be claimed only if you itemize, others hinge on the purpose of your home, but each is governed by strict rules. All the thresholds and conditions below are grounded in official IRS guidance, including updates from the latest tax changes (IRS guidance summarizing tax benefits for homeowners).
Why these deductions matter
If you are new to homeownership, these benefits may come as a pleasant surprise. In my talks with clients at Heart Mortgage, I often see people puzzled by what counts as deductible, and what doesn’t. Most people know about the mortgage interest deduction, but many do not realize the central role of the state and local tax (SALT) limit, or how rules for home sales relief work.
These deductions matter because they can shrink your taxable income by thousands of dollars if you qualify. But you need to know the limits, and which ones only apply if you itemize instead of taking the standard deduction (Tax Foundation analysis showing itemized deduction patterns).
The seven homeowner tax deductions you must know
Below are the most common tax breaks for homeowners that I discuss with my clients, drawn from my experience and backed up by IRS information and Tax Policy Center briefing insights:
- Mortgage interest deduction
- Property tax deduction (with the SALT cap)
- Home office deduction (self-employed only)
- Points paid at closing
- Energy-efficient improvement credits
- Mortgage insurance premium deduction
- Home sale capital gain exclusion
Mortgage interest deduction explained
For most people, this deduction is a lifeline in the first years of homeownership. If you itemize on Schedule A, you can deduct the interest paid on a loan used to buy, build, or improve your primary or secondary residence, up to $750,000 in mortgage debt ($375,000 if married filing separately) for loans taken after Dec. 15, 2017.
Older mortgages (before that date) can sometimes be grandfathered in up to the previous $1 million cap. On a practical level, what counts is the interest, not principal, and you must have records from your loan provider. The IRS has clear rules on this, and the deduction does not apply to personal loans or any mortgage for a non-residence (IRS recent homebuyers deduction details).
Understanding property tax deductions and the SALT cap
The federal deduction for state and local taxes (SALT) covers both property taxes and either state income or sales taxes. But since 2018, the combined total you may deduct is capped at $10,000 ($5,000 for married filing separately). This includes all state and local property taxes on your residence.
From what I’ve seen, this cap takes many by surprise, especially in high-tax states.
SALT deductions on homes are limited—but there are exceptions.
The SALT deduction limit only applies to personal-use homes. If you own a rental or business property, property taxes for these properties can be deducted as a business expense with no federal cap.
If you own multiple homes, the cap still applies to the combined total for your personal-use properties.
Home office deduction rules
When the pandemic shook up my work routine, I reviewed the home office deduction rules for myself and my clients. Many believed that every work-from-home employee could claim it. In reality, only self-employed individuals and independent contractors can usually claim a home office deduction. Regular W-2 employees generally cannot, unless in rare cases where the home office is for the employer’s benefit and not compensated elsewhere—very uncommon now.
The workspace must be used regularly and exclusively for business. If you qualify, you can deduct a proportion of your home’s mortgage interest, property taxes, utilities, repairs, and even depreciation, based on the square footage used for work. For the “simplified” method, multiply the area (max 300 sq. ft.) by $5 per square foot, capping at $1,500.
Points paid at closing
When financing a home, sometimes you pay “points” (prepaid interest) to get a better mortgage rate. In most cases, these points can be deducted as mortgage interest on your taxes in the year you paid them, if certain IRS conditions are met. If not, you might need to spread out the deduction over the life of the mortgage. For more detail, the guide to mortgage loans for homebuyers clarifies how points fit into the cost picture.
Ask your lender for the paperwork showing exactly how many points you paid.
Energy-efficient home improvement credits
I have seen more homeowners turning to sustainable choices, not only for the environment but because the tax code supports certain upgrades. The Energy Efficient Home Improvement Credit allows you to claim up to 30% of qualifying expenses for things like upgraded windows, doors, and HVAC systems, up to set annual limits. Solar panels, solar water heaters, and some battery storage systems qualify for even higher credits—details change every year, so always check the latest tax forms.
You need to keep all receipts and certifications. The benefits of these credits are outlined in various homeowner tax benefit summaries, including recent government briefings (Tax Policy Center briefing).
Mortgage insurance premium deduction
Homeowners who put down less than 20% might pay for mortgage insurance (PMI). This extra cost stings, but the IRS has allowed some filers to deduct qualifying mortgage insurance premiums as part of their mortgage interest if their income is below set limits. However, this benefit has fluctuated in recent years, so you want to review the latest IRS updates before claiming it.
This deduction is not automatically available—your adjusted gross income must be below $100,000 (or $50,000 for married filing separately), with the deduction reduced above these levels and phased out at $109,000 ($54,500 if filing separately).
Home sale capital gain exclusion rules
Selling your main home may trigger a taxable gain, but an exclusion softens the blow for most. If you lived in and owned your home for at least two out of the last five years before the sale, you may exclude up to $250,000 in capital gains (single filers), or $500,000 (married filing jointly), from tax.
If you have a unique situation—military service, surviving a spouse, or claimed home office depreciation—the exclusion rules change. The IRS has lots of detail on these exceptions (IRS guidance summarizing tax benefits for homeowners), so check your scenario carefully.
More ways to keep your taxes homeowner-friendly
While these are the seven deductions I see most used, I also encourage homeowners to learn more about all their rights and responsibilities. There are great resources on maximizing homeownership value in articles like the ones in the tax insights section and tips for both new and seasoned homeowners at Heart Mortgage’s homeownership category.
I’d also like to stress: You cannot deduct routine expenses like home repairs, insurance, or utility bills for a primary residence (IRS information for recent homebuyers). That’s a common myth. But if you refinance, you might be able to deduct certain costs—there’s a good explanation in the refinance your home guide.
Conclusion: Homeowner tax breaks are in reach
Whether you're buying a new place, upgrading your home, or preparing to sell, homeowner tax benefits put more power in your hands to reduce your overall tax burden. These rules are designed to help people like you invest in stable, secure homes and communities, just as Heart Mortgage strives to guide clients through every step of the journey—including supporting you as you claim the savings you deserve.
Want to maximize your next tax return or buy your first place with confidence? See all the ways Heart Mortgage can help at our first-time homebuyer’s resource center.
Frequently asked questions
What is a mortgage interest deduction?
The mortgage interest deduction lets you subtract interest paid on a qualified home loan from your taxable income if you itemize deductions. You can deduct interest paid on mortgages up to $750,000 for loans taken after December 15, 2017 ($375,000 if married filing separately). Older loans may be eligible for a higher limit. This only applies to loans on a primary or second home.
How do I claim property tax deductions?
To claim a property tax deduction, you must itemize deductions on Schedule A of your tax return. The combined state and local tax (SALT) deduction—including property taxes, state income, or sales taxes—is limited to $10,000 ($5,000 if married filing separately) for personal-use homes. You’ll need proof of taxes paid (such as a bill or escrow statement) for the year you claim the deduction.
Are home improvements tax deductible?
Most home improvements are not tax deductible for a primary residence in the year they are completed. However, some energy-efficient improvements (like solar panels or certain windows) can qualify for tax credits, and upgrades that increase your home’s basis may lower your taxable profit when you sell. Improvements for rental or business properties have different rules.
Is it worth it to itemize deductions?
It makes sense to itemize if your total deductions (mortgage interest, property taxes, gifts to charity, etc.) exceed the standard deduction for your filing status. For 2024, the standard deduction is $14,600 for singles and $29,200 for married couples filing jointly. If your itemizable expenses come close to or exceed these amounts, itemizing may reduce your taxes. According to the Tax Foundation, most who itemize do so for state/local taxes and mortgage interest.
Can I deduct home office expenses?
You can only deduct home office expenses if you are self-employed or an independent contractor using part of your home regularly and exclusively for business. The deduction does not apply to most W-2 employees. If you qualify, you may deduct a share of your mortgage interest, property taxes, utilities, repairs, and even use the simplified $5 per square foot method (up to $1,500 maximum).
