Other tax breaks for homeowners
The federal government and many states offer ample opportunities for homeowners to reduce their tax burdens. These breaks can be in the form of tax deductions or tax credits. Here are some common tax breaks available to homeowners for their federal income taxes.
Important Information
The 2017 Tax Cuts and Jobs Act, which affects some homeowner tax breaks, will expire on Dec. 31, 2025, unless Congress acts to extend some or all of the legislation’s provisions.[5]
Mortgage interest deduction
The interest portion of your monthly mortgage payments is tax deductible, whether for your primary residence or rental property. But you must meet some eligibility requirements.
First, you have to itemize your tax deductions on Schedule A instead of taking the standard deduction. The deduction is also limited by the amount of your home loan and the date you closed on the mortgage.
If you took out your home loan after Dec. 15, 2017, you can deduct the full amount you paid toward interest on the first $750,000 of your mortgage debt ($375,000 if married filing separately). For loans originated on or before that date, interest is deductible on loan amounts of up to $1 million ($500,000 if married filing separately).[5]
Real estate tax deduction
If you live in a state, county, or city that has a local tax on real estate, you can usually take a tax deduction for that property tax in the same year you paid it.
But you’ll have to itemize your deductions on your federal income tax return, and there are limits to the amount you can deduct for real estate taxes. The most you can deduct for state and local property or income taxes is $10,000.[6]
Home office deduction
If you exclusively use part of your home on a regular basis for running a business, you may be able to take a deduction for the amount of space you use for work — up to 300 square feet.
You can do this by either taking a simplified deduction of $5 per square foot or by maintaining records of actual expenses.[7] Either way, you’ll need to itemize your deductions to take this tax break.
Rental deduction
If you own a home that you rent out to tenants, you may be able to deduct certain business expenses related to operating your rental business. The Internal Revenue Service (IRS) says these expenses must be necessary and appropriate, such as mortgage interest, property taxes, operating expenses, and repairs.
Accessibility home improvements deduction
While no specific deduction exists for making home improvements, you may be able to take a medical expense deduction if you make certain medically necessary upgrades.[8]
Examples of deductible improvements include building an entrance ramp to your front door, adding grab bars or handrails, or making other modifications to accommodate an occupant with disabilities. You’ll need to itemize your deductions and meet all qualifications to be eligible for the deduction.
Energy-efficient improvements credits
You may be able to claim a tax credit if you install certain energy-efficient equipment in your home, such as central air conditioners, water heaters, furnaces, or hot water boilers. To qualify for the credit, the products must meet the Consortium for Energy Efficiency’s highest-efficiency tier, and meet other criteria outlined by the IRS.
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