Owning a home can be expensive, which is why many homeowners look for ways to ease the financial burden at tax time each year. For some homeowners, certain tax deductions can help lower your taxable income and potentially reduce how much you owe in federal taxes every April.
While there are some eligible tax deductions for homeowners, most home-related deductions require you to itemize your taxes. For many people, the standard deduction is higher. In those cases, claiming home-related tax deductions won’t actually lead to tax savings.
Here we’ll look at tax deductions homeowners are eligible for and when it makes sense to itemize.
Key Takeaways:
- Homeowners should compare the standard deduction to their eligible homeowner tax deductions every year to determine which option will provide the most tax savings.
- There are several general deductions homeowners can take if they itemize their taxes, such as mortgage interest and property tax, to name a few.
- The capital gains tax exclusion is available to eligible homeowners, regardless of whether you itemize or take the standard deduction.
How To Qualify For Homeowner Tax Deductions
You may be eligible for several federal tax deductions if they choose to itemize instead of taking the standard deduction. Understanding how these two options differ can help you decide which approach makes the most sense for your tax situation.
Standard Deduction
A standard deduction is a set amount that every taxpayer automatically qualifies for when filing their federal tax return. Instead of listing individual deductions, simply list that year’s standard deduction to lower the taxable income, based on each taxpayer’s status. The standard deduction totals for 2025 and 2026 are below. Remember: the IRS adjusts the standard deduction annually for inflation. The figures below are estimates and may change when the IRS releases new information.
| Taxpayer Status | 2025 Standard Deduction | 2026 Standard Deduction |
|---|---|---|
| Single taxpayer | $15,750 | $16,100 |
| Married individuals filing separately | $15,750 | $16,100 |
| Married couple filing jointly | $31,500 | $32,200 |
Itemized Deductions
Another option to lower one’s taxable income is to itemize tax deductions. The IRS list of eligible expenses includes several related to homeownership.
Itemized deductible expenses include:
- Donations to charity
- Home mortgage interest
- Income, sales, real estate and personal property taxes
- Losses from disaster and theft
- Medical and dental expenses that total over 7.5% of the adjusted gross income
If all of the itemized deductions total more than the standard deduction, then it could make sense to go this route.
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6 Tax Deductions For Homeowners
Thinking about itemizing your taxes? Here are six homeowner deductions you may be eligible to claim.
1. Mortgage Interest
If you have a home loan for your primary and/or secondary residence, you can deduct the mortgage interest you pay each year, as long as the loan is secured by the property and the home meets IRS qualification requirements. In order for a second home to qualify, it can’t be rented out or it could be rented but owner-occupied for the greater of 14 days or 10% of the time it’s rented out. It’s important to note that the deduction for mortgage insurance premiums has expired several times and may be reinstated by Congress, but it is not currently guaranteed for future tax years.
You also can deduct interest on a home equity loan or line of credit, but only if you use those loan proceeds to buy, build or substantially improve the home securing the loan.
In total, you may deduct interest on combined loans up to $750,000.
Documentation:
- Form 1040 or 1040-SR: federal income tax form
- Schedule A: list of itemized deductions
- Form 1098: mortgage interest statement
2. Home Mortgage Points
Home mortgage points, also known as discount points, can be paid up front when obtaining a mortgage to secure a lower interest rate. Because you’re essentially pre-paying interest, this expense falls under the mortgage interest tax deduction.
To claim this deduction, the transaction must meet a few specific requirements:
- The points were used on a loan related to your primary residence.
- You claim the deduction in the tax year you paid the points.
- You use the cash method of accounting.
- Your primary residence secures the mortgage.
- The loan was used to buy, build or improve the property.
You can’t deduct points, closing costs and associated fees if the seller paid them on your behalf.
Documentation:
- Form 1040 or 1040-SR: federal income tax form
- Schedule A: list of itemized deductions
- Settlement statement and Form 1098: document from your lender showing the amount paid
3. State And Local Real Estate Taxes
Most homeowners pay some sort of real estate or property tax to their local government every year, known as State And Local Tax (SALT). This money also can be used as an itemized deduction on your tax return. Previously, for 2024, tax payers could deduct up to $5,000 for a married person filing a separate return and $10,000 for all other tax filers.
For tax years 2025 through 2029, you may be able to claim a larger property tax deduction based on their income:
| Filing Status | Income | Maximum Annual Property Tax Deduction (2025 – 2029) |
|---|---|---|
| Married filing separately | Under $250,000 | $20,000 |
| Single taxpayers / Married couple filing jointly | Under $500,000 | $40,000 |
| Single taxpayers / Married couple filing jointly | Over $500,000 | Phases down to $10,000 at a 30% rate |
Under current federal tax law, the deduction for state and local taxes (including property taxes) is capped at $10,000 per year ($5,000 for married filing separately) through 2025. Future changes will require Congressional action.
Documentation:
- Form 1040 or 1040-SR: federal income tax form
- Schedule A: list of itemized deductions
- Property tax bill: retain a copy for your records
4. Medically Necessary Upgrades
Another tax deduction for homeowners is a medically necessary home improvement for you, your spouse or any dependents. It counts as a medical expense, but if the upgrade enhances the value of your home, you must subtract that amount from the cost before finalizing the deduction.
Here’s an example. Say you added an elevator to your home due to mobility issues. The total cost was $80,000, but the value of your home increased by $67,000 after the upgrade was completed. In this case, you can deduct only $13,000 on your itemized tax return.
Less desirable upgrades, like lower countertops for wheelchair accessibility, likely wouldn’t have a dramatic impact on your property value, so you’d be able to deduct a greater percentage of those costs.
Documentation:
- Form 1040 or 1040-SR: federal income tax form
- Schedule A: list of itemized deductions
- Worksheet A. Capital Expense Worksheet: calculate the amount you’re allowed to deduct
- Letter of Medical Necessity: While not required in all cases, a written recommendation from a doctor explaining how the home improvement related to medical care is recommended.
5. Home Office Expenses
Small business owners who use part of their home for business purposes can deduct a portion of relevant expenses. In order to qualify, you need to regularly use a portion of your home solely for conducting business – say, meeting with clients, storing inventory, renting out a section or operating a daycare facility.
There are two ways to calculate your home office expense deduction:
| Regular Method | Simplified Option |
|---|---|
| ✅ Deduct direct business expenses in full ✅ Deduct indirect expenses based on the percentage of the home’s square footage used for business | ✅ Deduct $5 per square foot (up to a maximum of 300 square feet) of the part of your home dedicated to business use |
Based on the percentage of your home that you use for business, if you meet the IRS guidelines, you may be eligible to deduct the following home office-related expenses:
- Homeowners insurance
- Homeowners association fees
- Cleaning services or supplies for the business space
- Mortgage insurance and interest
- Utilities for the business space
- Home repairs impacting business space
Documentation:
- Form 1040 or 1040-SR: federal income tax form
- Schedule A: list of itemized deductions
- Form 8829: calculates your allowable deductions for the part of your home used for business
- Schedule C: reports self-employment profits and expenses
6. Capital Gains Tax Exclusion On Sale Of Home
When you sell your home, you may qualify to exclude some or all of the capital gains from your income tax for the year. Even more exciting is that you don’t need to itemize your deductions in order to take advantage of the exclusion. Here’s how to qualify:
- You owned and used the property as your main home for two of the last five years.
- You did not use the tax exclusion for another home sale in the previous 2 years prior to the sale of your home.
How much can you exclude? For individual taxpayers, the maximum amount is $250,000. Married taxpayers filing jointly can exclude up to $500,000 in capital gains. So if the profit on your home doesn’t exceed the maximum for your tax filing status, you won’t have to pay any taxes on the sale of your home.
Documentation:
- Form 1099-S, Proceeds From Real Estate Transactions: submit only if you receive this income-reporting document
- Schedule D, Capital Gains and Losses: only if you can’t exclude all of the gains on the home
- Form 8949, Sales and Other Dispositions of Capital Assets: only if you can’t exclude all of the gains on the home
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10 Home Expenses You Can’t Deduct
While the IRS allows deductions for some home-related expenses, many don’t qualify. It’s important to understand which home expenses are not tax-deductible. Nondeductible items include:
- Homeowners and title insurance
- Extra principal payments
- Domestic help wages
- Depreciation
- Utilities
- Most settlement and closing costs (though some are deductible or added to basis)
- Forfeited deposits, down payments and earnest money
- Internet
- Homeowners association fees
- Home repairs
The exception for some of these expenses applies if you qualify for the home office expenses deduction as a small business owner, using a portion of the property for work purposes, or if you are renting out your property.
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FAQ
The Bottom Line: You May Qualify For Tax Deductions As A Homeowner
If you qualify for enough homeowner tax deductions, it could be worth itemizing your taxes to take advantage of a lower tax bill. Always compare actual savings by weighing your eligible itemized deductions to the latest standard deduction amount before you decide how to file your taxes.
Lauren Ward
Lauren Ward is a writer with over a decade of experience covering financial topics for businesses and publications. Her work has also been featured in major publications such as U.S. News and World Report, CNN, Business Insider, The New York Post and Bankrate. Her expertise includes real estate, mortgages, small business, insurance and more.
