9 tax breaks for homeowners

Buying and owning a home has become increasingly expensive, leaving many people looking for relief. Federal Reserve data shows the average sales price for an existing home has risen almost 46% over the past 10 years. Property taxes, insurance, maintenance fees and utilities have also increased during this period, so even longtime homeowners may feel the squeeze.

Despite increased costs, homeownership is still a worthwhile goal—and one of the primary ways Americans build equity for retirement and strengthen their credit profile. If you own a home and itemize deductions on your federal tax return, you may be eligible to claim several popular homeowner tax deductions that can help you pay less taxes while building long-term wealth.

1Mortgage interest deduction

The mortgage interest deduction allows you to deduct the amount you pay in mortgage interest—to a limit. As mortgage rates have crept higher over the last several years, the mortgage interest deduction has become more valuable for homeowners who claim it. In general, the following stipulations apply.

• Deduction limits for new debt: Interest on mortgages originated after December 15, 2017, is deductible for the first $750,000 of debt for married couples filing jointly, or $375,000 for married couples filing separately.
• More generous limits for older debt: The interest deduction for loans originated on or before December 15, 2017—and closed before April 18, 2018—is grandfathered. This interest is deductible on the first $1 million of debt for married couples filing jointly, or $500,000 for married couples filing separately.
• Eligibility: The debt must be secured by a primary or secondary home used for personal purposes, and the funds must be used to build, purchase or significantly improve the home. Rental homes don't qualify unless you meet certain residency requirements.

2Mortgage insurance deduction

Beginning in the 2026 tax year, mortgage insurance premiums will again be deductible for primary and secondary homes. This is a restatement of a deduction that expired prior to the 2022 tax year. The deduction is subject to the following criteria.

• Deduction limits: Mortgage insurance premiums are considered tax-deductible mortgage interest and are subject to the same limits—up to $750,000 for married couples filing jointly, or $375,000 for married couples filing separately.
• Eligibility: Premiums paid to private mortgage insurance companies and federal agencies qualify for mortgage insurance contracts issued after 2006. The insurance must be for debt incurred to acquire, build or substantially improve your principal residence or a second home used for personal purposes.
• Income stipulations: The deduction begins phasing out for homeowners with a modified adjusted gross income, or MAGI, over $100,000—or $50,000 for married homeowners filing separately.

3Interest deduction for home loans and credit lines

If you want to make improvements or additions to your home, two popular sources of funding are home equity loans and home equity lines of credit, or HELOCs. In general, homeowners who obtain a home equity loan or HELOC can deduct the interest they pay on these loans, subject to certain dollar limits.

• Requirement: Funds must be used to buy, build or substantially improve your qualified primary residence or a second home.
• Deduction limits: Interest is only deductible on the portion of the loan used for home improvements. For example, if a loan is used for both improvements and furniture, only the interest on the funds spent on improvements qualifies for a tax deduction. The deduction is also subject to the same limits on total mortgage debt—$750,000 for married couples filing jointly, or $375,000 for married couples filing separately. Note that this is a combined, cumulative limit for mortgage interest and HELOC debt if it's used to buy, build or improve a home. This cap applies to the total principal balance of all loans secured by a main or second home.

4Discount points deduction

The IRS defines discount points, also known as loan discounts, as charges paid—or treated as paid—by a borrower to obtain a home mortgage.

How discount points work

The upfront advantage of negotiating discount points ahead of closing your mortgage is that you may be able to reduce your interest rate. Typically, one discount point costs a fee equivalent to 1% of the total mortgage amount, and the lender will often reduce the mortgage interest rate payable by 0.25% in exchange for this fee. There are no official limits on the negotiation. Loan and lender types, as well as the current mortgage rate, can have an impact. Discount points can also be set at more or less than 1% of the loan amount and reduce the interest payable by different amounts.

Mortgage points are considered prepaid mortgage interest. There are situations when you can deduct the amount paid for points from taxes during the life of the mortgage, as long as you itemize your deductions.

Keep in mind that the similarly labeled loan origination points can't be deducted. Loan origination points are fees charged by mortgage lenders that contribute to their costs for providing the loan. Only the discount points paid to reduce the interest rate are deductible.

Discount points options

You can choose to deduct the full number of points you've paid for in the same year you paid for them if you satisfy the criteria established by the IRS. The most important one is that your mortgage can't exceed $750,000 for married couples filing jointly, or $375,000 for married couples filing separately.

You can also choose to deduct them equally over the life of the mortgage. If you choose this option, there are still necessary criteria to meet.

There are many rules around deduction of points, including the status of your property as your main home and the specific purpose of the loan. It's a good idea to seek professional advice to understand how this may impact your situation.

5Property tax deduction

Although property tax rates vary depending on the location of your home, you can apply the state and local tax, or SALT, deduction on your federal tax return.

The One Big Beautiful Bill Act, or OBBBA, passed in July 2025, temporarily expanded the limit for this deduction. As a result, the maximum SALT deduction for the 2025 tax year is $40,000 for single filers or married couples filing jointly and $20,000 for married couples filing separately. This cap applies to the total amount of state and local taxes you can deduct, which includes property taxes and either state income or sales taxes.

Note that the maximum deduction will increase by an additional 1% of the prior year's limit for tax years 2026 through 2029. It will revert to $10,000 beginning with the 2030 tax year.

6Capital gains exclusion

If you recently sold a home, a capital gains exclusion for primary residences may lower your tax bill. If you sell a home that has appreciated in value, the money you earn on the sale is called a capital gain—and may be treated as taxable income.

This is where the exception for primary residences comes into play. The IRS allows homeowners to exclude up to $250,000—or $500,000 for married couples filing jointly—of the capital gain. To qualify, you must own and use your home as your primary residence for 2 years of the previous 5 years before the sale.

It's important to be diligent about keeping track of improvements or renovations you make to your home because these increase your basis and the threshold from which the shelter amount starts.

7Deduction for medically necessary home improvements

If you made alterations or improvements to your home to accommodate a medical need, you may be able to deduct the costs associated with these renovations.

Some examples of medically necessary home improvements include:

• Entrance ramps
• Widened doorways
• Modified stairways
• Railing and support bars
• Bathroom modifications
• Lifts

These home improvements must be for the purpose of medical care for you, your spouse or a dependent. Review the list of IRS-approved capital expenses to determine if your renovations qualify for this tax deduction.

8Tax write-off for home office expenses

If you're self-employed and have a dedicated home office, you may be eligible for the home office deduction. To qualify, you must be a small business owner, freelancer or independent contractor. Remote workers employed by a business are excluded from this deduction.

• Exclusive use requirement: You must use a portion of your home exclusively for business purposes.
• Deduction options: If you qualify, you can deduct a percentage of your home office expenses.
• Simplified option: You can also use the IRS simplified method to deduct $5 per square foot of dedicated office space—up to a maximum of 300 square feet, or $1,500.

See IRS Publication 587 for more information on qualifying for the home office deduction.

9State tax breaks for homeowners

Depending on where you live, your state or local jurisdiction may offer additional homeowner tax credits and deductions. For example, many states allow taxpayers to itemize deductions on their returns, including deductions for mortgage interest and property taxes—subject to some limits.

Because state laws vary, check with your state tax office for relevant tax breaks for homeowners. An accountant with experience in local tax law can help you make sure you're claiming every available deduction or credit.

Is there a first-time homebuyer tax credit?

Unfortunately, the federal first-time homebuyer tax credit is no longer available. This tax credit provided first-time homebuyers with a refundable credit equal to 10% of the purchase price of the home—up to $8,000 for married taxpayers who filed jointly. This credit was created in 2008, but it was phased out in 2010.

If you're preparing to buy your first home, talk to your mortgage banker. There are several federal and state homebuying assistance resources, such as vouchers, grants and down payment assistance programs available. Your mortgage banker can help you determine your eligibility and show you where to apply.

First-time homebuyers—typically defined as those who haven't owned a primary residence in the last 2 years—can generally withdraw up to $10,000 from their IRA penalty-free. Homebuyers can also borrow up to 50% of their 401(k)'s vested balance, with a limit of $50,000. This loan must be paid back to the 401(k), typically within in 5 years.

Are home energy tax credits still available?

If you made clean-energy updates to your home in 2025, you may still be able to claim two home energy tax credits—the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit—on your 2025 tax return.

The Energy Efficient Home Improvement Credit applies to renovations like new insulation, windows and heat pumps. This credit can apply to 30% of qualified expenses, up to $3,200. Individual improvements must also meet energy-efficiency standards, and some are subject to specific credit limits.

If you added a renewable energy source to your home—such as solar, wind, geothermal, fuel cells or battery storage technology—you may qualify for the Residential Clean Energy Credit. This homeowner tax credit applies to 30% of eligible expenses for updates made in 2025.

The 2025 tax year is the last year of availability because the OBBBA eliminated both home energy tax credits for the 2026 tax year and beyond.

The bottom line

While the costs of owning a home have increased, there may still be homeowner tax credits and other tax benefits for homeowners. It's important to note that additional tax breaks may be available that aren't covered here.

The tax code is always subject to changes that may eliminate, alter or add new deductions and credits so it's a good idea to consult a tax specialist who can help ensure you're claiming every deduction and credit available to you.