Owning a home comes with its fair share of expenses, but tax season can offer a little relief. While nobody buys a house just for the tax breaks, they’re certainly a welcome perk. Whether you're a new homeowner or have been in your house for years, here are eight key deductions you should know about when filing your taxes in 2025.
1. Mortgage Interest Deduction
One of the biggest tax perks for homeowners is the ability to deduct mortgage interest—especially now that rates are higher, making the deduction more impactful. To qualify, you need to itemize your tax return instead of taking the standard deduction. The tax savings could be worth it if your mortgage interest, along with other deductions, adds up.
2. Home Equity Loan & HELOC Interest
If you’ve tapped into your home’s equity through a home equity loan (HEL) or home equity line of credit (HELOC), you may be able to deduct the interest—but only if the funds were used to improve your home. The deduction applies to mortgage balances up to $750,000 for joint filers (or $375,000 if filing separately).
3. Discount Points
If you paid discount points when securing your mortgage to lower your interest rate, you may be able to write off those costs. A good rule of thumb: if you plan to stay in your home for at least five years, buying points can make financial sense.
4. Property Tax Deduction
Property taxes can be a hefty expense, but the IRS allows you to deduct up to $10,000 in state and local taxes (including property taxes) on your federal return. This limit applies whether you own one home or multiple properties.
5. Homeowners Association (HOA) Fees
HOA fees typically aren't deductible—unless you're renting out the property or using part of your home as a dedicated home office. In those cases, some or all of your HOA dues could be considered a business expense.
6. Home Improvements & Renovations
Most home upgrades aren’t immediately tax-deductible, but major renovations that add value—such as a new roof, kitchen remodel, or energy-efficient upgrades—can reduce your capital gains tax when you sell. Keeping detailed records of improvements can save you money in the long run.
7. Home Office Deduction
Self-employed homeowners who use a dedicated home office for business can deduct a portion of their home-related expenses, including utilities, insurance, and maintenance. However, employees working remotely for an employer don’t qualify for this deduction.
8. Capital Gains Exclusion on Home Sales
If you sell your primary residence, you may not owe capital gains tax on the first $250,000 of profit (or $500,000 for married couples) if you’ve lived in the home for at least two of the last five years. That’s a major tax break for long-term homeowners looking to cash in on appreciation.
Final Thoughts
While tax breaks shouldn’t be the sole reason to buy a home, they can certainly help soften the financial burden of homeownership. Whether you’re deducting mortgage interest or taking advantage of capital gains exclusions, understanding these deductions can put more money back in your pocket. And if you're unsure about which ones apply to you, consulting a tax professional is always a smart move.