Tax Deductions for Homeowners in 2025

Couple on laptop together in home

Owning a home can build equity over time and provide a sense of stability. On top of that, you might benefit from valuable tax deductions, especially if you itemize instead of taking the standard deduction.

Here are some of the most common tax deductions for homeowners. Keep in mind, it’s important to discuss your tax strategies with a certified tax professional.

Mortgage Interest

If you have a mortgage, chances are you’re paying interest on it. And if so, you can deduct the interest paid on your loan for the year. But there are limits.

For mortgages taken out after December 15, 2017, you can deduct the interest on up to $750,000 of debt. If your loan is older, the cap is $1 million.

This deduction might significantly reduce your taxable income, resulting in a bigger refund or owing less—especially during the early years of your mortgage when most of your payments go toward interest rather than principal.

Property Taxes

Property taxes are another big tax deduction. Homeowners can deduct up to $10,000 for state and local taxes, which includes property taxes. If you’re married and filing separately, the limit is $5,000.

Home Equity Loan or HELOC Interest

If you’ve taken out a home equity loan or home equity line of credit (HELOC), this interest may also be deductible. But there’s a catch: the loan must be used to buy, build or substantially improve the home that secures the loan.

Therefore, if you’re using funds to pay off credit card debt or take a vacation, the interest won’t qualify for a deduction. 

Discount Points

When you took out your mortgage, did you pay for points to lower your interest rate?

If so, those points could be tax-deductible too. Typically, you can deduct the full amount in the year you paid them as long as the loan was used to buy or build your primary home.

If you refinanced, the points may still be deductible, but you’ll have to spread the deduction over the life of the loan.

Home Office Deduction

If you’re self-employed, you might also qualify for the home office deduction. To claim it, though, a portion of your home must be used exclusively for business purposes.

The deduction can cover a percentage of your rent or mortgage interest, utilities, and even repairs. There’s a simplified option too, where you can deduct $5 per square foot of your home office, up to 300 square feet.

Home Improvements for Medical Reasons

Certain medically necessary home improvements are also deductible. These improvements may include installing a wheelchair ramp, widening doorways or adding a stairlift.

The amount you can deduct will depend on if the home improvement increases the value of your property.

Residential Clean Energy Credit

If you’ve made your home more energy-efficient this year, you might qualify for a tax credit, which is even better than a deduction.

A credit reduces the amount you owe in taxes dollar-for-dollar.

The Residential Clean Energy Credit covers a percentage of the cost of solar panels, wind turbines, geothermal heat pumps and other energy-efficient upgrades. The credit is 30% of the cost.

Our local loan experts are happy to answer any questions you have. Please contact us to learn more.

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