Guide to Tax Deductions for Homeowners in 2025
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Owning a home comes with costs, but it also provides tax benefits that can lower your taxable income. For those filing taxes in 2025, deductions like mortgage interest and home office expenses have become more relevant with the rise of remote work. Some tax benefits have been long established, while others now apply to changing work situations. Knowing which deductions you qualify for can help maximize savings. A financial advisor could provide guidance on eligible deductions and tax compliance.
Tax deductions can help homeowners offset some of the costs associated with property ownership, potentially leading to substantial savings. These deductions apply to mortgage-related expenses, home improvements and certain state and local tax payments.
While many deductions remain the same year over year, recent legislative changes could impact eligibility or deduction limits in 2025. Here are six common homeowner tax deductions to note.
Mortgage discount points are fees paid to lenders at closing for the purpose of reducing a loan’s interest rate. The IRS allows deduction of discount points on a primary residence as long as the mortgage meets specific requirements:
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Points paid on a home purchase loan are fully deductible in the year of payment if they are considered prepaid interest.
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If refinancing a mortgage, discount points must be deducted over the life of the loan rather than in a single year.
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The deduction is only available for points paid on a primary residence, not on investment or rental properties.
Homeowners can deduct state and local property taxes they pay each year. However, this deduction falls under the state and local tax (SALT) cap, which limits total deductions for state and local taxes, including property and income taxes. The cap is $10,000 for single filers and married couples filing jointly, or $5,000 for married individuals filing separately.
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This deduction is available for property taxes paid on a primary or secondary home but not on rental properties, which instead fall under business deductions.
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Taxes paid through an escrow account are deductible when actually paid to the tax authority, not when deposited into escrow.
One of the most valuable tax deductions for homeowners is the mortgage interest deduction, which applies to interest paid on a qualified home loan.
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The deduction is available for mortgage loans of up to $750,000 for single filers and married couples filing jointly, or $375,000 for married individuals filing separately.
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Homeowners who purchased their home before December 15, 2017, can deduct interest on mortgage loans up to $1 million.
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This deduction applies to primary and secondary residences, but not to investment properties.
Interest paid on a home equity loan or home equity line of credit may be tax-deductible if the loan is used to buy, build or substantially improve the home.
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Homeowners can deduct interest on total combined mortgage debt, including primary mortgage and HELOC, up to $750,000.
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If the HELOC funds are used for personal expenses, such as paying off credit card debt, the interest is not deductible.
Certain home improvements qualify for tax deductions if they increase the home’s value or improve accessibility for medical reasons:
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Improvements made for medical necessity, such as installing wheelchair ramps or modifying bathrooms for disability access, may qualify as medical expense deductions if they exceed 7.5% of adjusted gross income.
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Energy-efficient home upgrades, including solar panels, energy-efficient windows or HVAC systems, may qualify for federal tax credits, reducing the tax owed rather than providing a deduction.
Homeowners who use part of their home exclusively and regularly for business purposes may qualify for the home office deduction:
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The deduction applies only to self-employed individuals or business owners. Employees working remotely for an employer do not qualify.
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The simplified deduction method allows a deduction of $5 per square foot of office space, up to 300 square feet.
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The actual expense method requires tracking home office costs, including rent or mortgage interest, utilities and home depreciation (note that depreciation is subject to recapture tax when property gets sold), but often results in a larger deduction.
While homeowners can benefit from several tax deductions, some common home expenses do not qualify for tax relief:
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Homeowners insurance premiums are not tax-deductible, as they are considered personal expenses.
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Mortgage principal payments are not deductible, while mortgage interest is.
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Homeowners association fees are generally not deductible unless the property is used for rental or business purposes.
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Title insurance costs when purchasing a home are not deductible.
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Routine home repairs, such as fixing a leaky roof or replacing appliances, are not deductible unless they qualify as necessary home improvements that add long-term value.
Homeowners who qualify for tax deductions must itemize deductions rather than take the standard deduction to claim them. Here are five steps to deduct homeowner expenses on a tax return.
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The standard deduction for 2025 is $15,000 for single filers and $30,000 for married couples filing jointly.
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If total deductions exceed this amount, itemizing deductions may provide greater tax savings.
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Keep records of mortgage interest statements, property tax payments and receipts for qualifying home improvements.
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Retain copies of closing statements for mortgage discount points and home equity loan documentation.
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Report deductions, such as mortgage interest, property taxes and home improvements for medical expenses, on Schedule A of Form 1040.
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Homeowners can file by using IRS Free File or tax software such as TurboTax or H&R Block, or through a tax professional.
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If deductions are complex, working with a tax advisor or CPA can help avoid errors and maximize savings.
Owning a home provides several valuable tax deductions. But, eligibility depends on income limits, usage of funds and tax law changes. Mortgage interest, property taxes and home equity loan interest remain key deductions, while home office expenses and necessary home improvements may also provide tax benefits.
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If you’re looking for ways to lower your tax liability, a financial advisor who specializes in tax planning can help optimize your finances. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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If you want to know how much your next tax refund or balance could be, SmartAsset’s tax return calculator can help you get an estimate.
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