At a Glance
- Homeowners can reclaim up to $10,867 annually in maintenance costs through tax deductions.
- Key breaks include mortgage interest, property taxes, home-office, and energy-efficiency credits.
- Most savings require itemizing deductions on Schedule A.
- Why it matters: Knowing which credits apply can turn a yearly money pit into a tax refund.
Homeownership costs are climbing, with the average homeowner spending $10,867 each year on maintenance. Yet the tax code offers a range of deductions and credits that can offset those expenses. Understanding how to claim them is essential for any homeowner looking to keep more money in their pocket.
How Homeowner Tax Breaks Work
Most federal benefits for homeowners are deductions that reduce taxable income. To qualify for most of them, you must itemize on Form 1040 Schedule A; otherwise, you can only use the standard deduction, which is $15,750 for single filers and married filing separately in 2025.
- Itemize if your deductions exceed the standard amount.
- Credits (e.g., solar) apply regardless of itemizing.
- Tax software can quickly determine the better choice.
Mortgage Interest Deduction
Mortgage interest is one of the most common and lucrative deductions, especially for new homeowners whose payments are heavily weighted toward interest.
- Deduct interest on the first $750,000 of debt (or $1,000,000 for loans before Dec. 15, 2017).
- Married filing separately can deduct half of those amounts.
- Use Form 1098 from your lender to report the interest on Line 8 of Schedule A.
Mortgage Points
Buying discount points can lower your interest rate and add prepaid interest to the deduction.
- Each 1 % of the loan reduces the rate by roughly 0.25 %.
- Points are added to the interest amount on Schedule A.
Mortgage Credit Certificates (MCC)
First-time homeowners may receive a credit on a percentage of their mortgage interest.
- Credit rates vary by state, ranging from 10 % to 50 %.
- Maximum credit is $2,000.
- File Form 8396; itemizing is not required.
Property Tax Deduction
Property taxes were limited to $10,000 by the Tax Cuts and Jobs Act of 2017, but a new bill in July 2025 raises the cap to $40,000.
- Track annual payments and report on Line 5b of Schedule A.
- The deduction starts to phase out at higher incomes.
Home Office Deductions
If you use a space exclusively and regularly for business, you can claim home-office expenses.
- Standard deduction: $5 per square foot, up to 300 sq ft.
- Regular method: calculate the business-use percentage of your home.
- Use Form 8829 for reporting; renters can also claim.
- Remote employees rarely qualify.
Energy-Efficiency Tax Credits
Homeowners who made energy-efficiency upgrades in 2025 can claim credits that expire after that year.
| Credit | Eligible Items | Credit Rate | Limit |
|---|---|---|---|
| Residential Clean Energy | Solar, wind, geothermal, etc. | 30 % | No limit (except fuel cell $500 per half-kW) |
| Energy-Efficient Home Improvement | Heat pumps, water heaters, insulation, roof repairs, windows | 10 % | No limit |
| Energy Star-Certified Items | Heat pumps, furnaces | Flat $50-$300 | – |
- File Form 5695 to claim the credits.
- Electric vehicle charging stations qualify for a 30 % credit or $1,000, whichever is smaller, and expire on June 30, 2026 (Form 8911).
Home Equity Loan Interest
Interest on a home equity loan or second mortgage is deductible like regular mortgage interest.
- Maximum loan amounts: $1 million (joint) or $750,000 (single) if the home was bought after Dec. 15, 2017.
- Only interest used for buying, building, or improving the home is deductible.
- Report on Line 8 of Schedule A.
Selling a Home and Capital Gains
When you sell, you pay tax on the gain, but a primary-residence exclusion can reduce the taxable portion.
- Exclusion: $500,000 for married couples, $250,000 for single or separate filers.
- Must have lived in the home for two of the last five years.
- Report on Form 8949; a 1099-S may provide the sale information.
Medical-Related Home Improvements
Medical expenses that exceed 7.5 % of adjusted gross income can include certain home improvements.
- Examples: accessibility ramps, widened doorways, lifts.
- Keep receipts and add the total to Line 1 of Schedule A.
What Can’t Be Deducted?
Some common homeowner costs are not deductible:
- Down payment, principal mortgage payments, utilities, insurance, lawn maintenance.
- Depreciation of the home’s value.
Homeowners should consult a tax professional to ensure they’re maximizing all applicable deductions and credits.
Key Takeaways
- Itemizing on Schedule A unlocks mortgage, property, and home-office deductions.
- Energy-efficiency credits and MCCs offer significant refunds but expire after 2025 or 2026.
- The new property-tax cap of $40,000 may benefit higher-income homeowners.
- A primary-residence sale can exclude up to $500,000 in gains.
- Always keep receipts and use the correct IRS forms to claim these benefits.
