Homeowners can deduct costs like mortgage interest and personal property taxes up to a certain limit to reduce their tax bill. In certain cases, home improvements can also be deducted.
Do you know?
- The interest portion of your mortgage payment is tax-deductible
- Some home improvements are also tax-deductible
- Here are some of the tax benefits for homeowners you should know
Remember: If you want to deduct homeownership expenses, you must opt for itemized deductions. Most taxpayers, around 90%, claim the standard deduction, which is a flat amount based on your filing status.
4 tax advantages for homeowners in 2025
1. Mortgage interest deduction
The interest portion of your mortgage payment is tax deductible, but it requires you to itemize your tax return. The mortgage interest deduction is a tax incentive for homeowners and lets you reduce your taxable income for the amount you’ve paid in mortgage interest during the year.
Generally, you can deduct interest paid on up to $750,000 worth of your principal on either your first or second residence. For those who are married and filing separately, the limit drops to $375,000. The limits are higher if you bought the house before Dec. 16, 2017.
There are several criteria your home loan has to meet to qualify. For example, you can’t deduct any mortgage interest debt whose proceeds did not go toward the construction, purchase or improvement of a home.
Also: If you bought points on your mortgage, you may be entitled to a similar tax deduction.
You’ll find a summary of your mortgage interest payments on Form 1098, which lenders send out around the end of January.
Who benefits?
“The benefits of the deduction go primarily to high-income taxpayers because high-income taxpayers tend to itemize more often, and the value of the deduction increases with the price of a home,” according to the Tax Foundation, a Washington, D.C.-based think tank.
For perspective: Just 7.5% of taxpayers making under $200,000 itemized in 2020, while 45% of taxpayers making over $200,000 itemized, according to the Bipartisan Policy Center.