Tax Deductions for Homeowners: What You Can and Cannot Claim

Understanding Homeownership Deductions

Homeownership offers various financial benefits, including potential tax deductions. However, it’s crucial to understand which expenses are deductible and which are not.

Deductible Expenses

  • Mortgage Interest: Homeowners can deduct interest paid on their mortgage loans, subject to certain limits.
  • Property Taxes: State and local real estate taxes are deductible, up to a limit of $10,000.
  • Mortgage Insurance Premiums: Premiums paid for private mortgage insurance (PMI) are deductible.

Non-Deductible Expenses

  • Homeowners’ Insurance: Premiums for homeowners’ insurance, including fire and comprehensive coverage, are not deductible.
  • Principal Payments: Payments made towards reducing the principal balance of the mortgage are not deductible.
  • Home Repairs and Improvements: Costs associated with home repairs and improvements are not deductible.
  • Utilities: Expenses for utilities such as gas, electricity, and water are not deductible.
  • HOA Fees: Homeowners’ association fees or condominium association fees are not deductible.

Mortgage Interest Deduction

Homeowners can deduct mortgage interest paid during the tax year. However, there are limits to this deduction. For mortgages originated after December 15, 2017, the limit is:

  • $750,000 for individuals
  • $375,000 for married couples filing separately

Property Tax Deduction

State and local real estate taxes are deductible, up to a limit of $10,000. This limit applies to the combined total of property taxes and state and local income taxes or sales taxes.

Mortgage Insurance Deduction

Premiums paid for private mortgage insurance (PMI) are deductible. PMI is typically required for loans with a down payment of less than 20%.

Other Considerations

  • Itemized Deductions: To claim homeownership deductions, taxpayers must itemize their deductions on Schedule A of Form 1040.
  • Standard Deduction: Taxpayers who do not itemize their deductions can still claim the standard deduction, which is a fixed amount that varies depending on filing status.
  • Mortgage Interest Credit: Low-income homeowners may qualify for the mortgage interest credit, which reduces the amount of income tax owed.

Additional Resources

Everything you need to know about filing taxes as a new homeowner


Can you write off a new home purchase on your taxes?

The one-time home purchase costs that are tax-deductible as closing costs are real estate taxes charged to you when you closed, mortgage interest paid when you settled, and some loan origination fees (a.k.a. points) applicable to a mortgage of $750,000 or less.

Can I use my tax refund to buy a house?

FACT: Using your IRS tax refund for a down payment or to pay closing costs is allowable and an acceptable source of funds to purchase a home. These funds do not have to be ‘seasoned’, contrary to what many believe.

How much money do you get back on taxes for mortgage interest?

Before the TCJA, the mortgage interest deduction limit was on loans up to $1 million. Now, the loan limit is $750,000. For the 2024 tax year, married couples filing jointly, single filers and heads of households can deduct up to $750,000. Married taxpayers filing separately can deduct up to $375,000 each.

Do your taxes affect buying a house?

Tax liens can negatively affect creditworthiness and financing options, especially in the home buying process’s final stages. Mortgage lenders can see your tax lien, so your inability to pay your debts will have negative affects.

Can I claim tax benefits if I bought my first house?

If you bought your first house last year, then you probably don’t know what to expect when it comes to claiming your tax benefits. Now that you’re a homeowner, there are certain deductions you can claim on your taxes that could benefit your bottom line.

Can I claim a tax deduction if I buy a home?

The only tax deductions on a home purchase you may qualify for is the prepaid mortgage interest (points) . To deduct prepaid mortgage interest (points) paid to the lender, you must meet these

Does buying a house help with taxes?

It’s possible that buying a house can help with taxes — but only for tax filers who itemize their deductions. In 2020, the most recent year with data available, more than 87% of Americans took the standard deduction rather than itemizing. This signals that it may be unlikely you’ll have enough deductions for itemizing to make sense.

Can a homebuyer claim a tax credit?

This change could add a tax credit to the breaks that some homebuyers can claim. The First-Time Homebuyer Act of 2021 provides for a credit equal to 10% of the purchase price of your home, up to a $15,000 limit ($7,500 for married filing separately). As the name implies, you must be buying your first home to qualify.

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