Buying a home is one of the biggest investments you’ll ever make—and if you’re smart about it, it can also bring some major tax advantages. Whether you’re a brand-new homeowner, a seasoned property owner, or somewhere in between, it’s important to know how to navigate the tax breaks, deductions, and strategies available to you.
Here’s a practical guide to key tax tips for homeowners, with links to deeper resources to help you save more and stress less.
1. Mortgage Interest Can Lead to Major Deductions
One of the best-known tax perks of homeownership is the ability to deduct mortgage interest. If you itemize deductions on your return, you may be able to deduct the interest you paid on your home loan—potentially saving you hundreds or even thousands of dollars a year.
Helpful details:
- You can deduct interest on up to $750,000 of qualified residence loans ($375,000 if married filing separately) for mortgages incurred after December 15, 2017. For mortgages taken out on or before that date, the prior $1 million ($500,000 if MFS) limit generally applies.
- Home equity loan interest is deductible only if the funds were used to “buy, build, or substantially improve” the home securing the loan.
- Points paid at closing to obtain a mortgage for the purchase of a primary residence may be fully deductible in the year of purchase if certain IRS requirements are met. Otherwise, points are gradually deducted over the life of the loan.
- You must itemize your deductions using Schedule A (Form 1040) to claim mortgage interest deduction.
- Refinanced loans are eligible for the mortgage interest deduction, but special rules apply based on the loan usage.
2. Earning Rental Income? Here’s What the IRS Wants to See
If you’re renting out part of your home, an investment property, or even doing short-term rentals like Airbnb, you’ve got extra tax responsibilities—and opportunities. Rental income must be reported, but you can also claim deductions for property management, repairs, and more.
Helpful details:
- Rental income includes advance rent, security deposits kept, and expenses paid by tenants.
- If you rent for fewer than 15 days per year, you generally don’t have to report that income. However, you also cannot deduct any related rental expenses (other than property taxes and mortgage interest deductible for personal residences).
- Vacation homes follow special “personal use vs. rental use” rules.
3. Don’t Let Property Taxes Overwhelm You
Property taxes are a reality for every homeowner, but you don’t have to get buried under confusing bills. You might even be able to deduct some or all of your property tax payments on your federal return (depending on your situation).
Helpful details:
- State and local taxes (SALT)—including property taxes, state income taxes, and/or sales taxes—are subject to a combined deduction cap of $10,000 ($5,000 if married filing separately) on your federal return.
- Some states offer property tax credits or circuit breaker programs for low- and moderate-income homeowners.
- Escrow accounts commonly pay your property taxes along with your mortgage; always double-check year-end mortgage statements and Form 1098 to verify amounts paid.
4. Plan for Capital Gains When Selling Your Home
Thinking of selling your house? Here’s a sweet piece of news: many homeowners qualify for a capital gains tax exclusion on profits from the sale. (Translation: you could walk away with a fat check—and little to no tax bill—if you meet the right criteria.)
Helpful details:
- Individuals can exclude up to $250,000 of gain; married couples filing jointly can exclude up to $500,000.
- You must have owned and lived in the home as your primary residence for at least two of the last five years.
- Home improvements (like remodeling) can increase your adjusted basis and lower your taxable gain.
- If you sell your home at a loss, the IRS does not allow you to deduct the loss on your tax return because the home is considered personal-use property.
- Special rules apply for military members who must move due to service.
5. Are Moving Expenses Tax-Deductible?
If you recently moved for a new job (or are planning to), you might be wondering whether those moving truck receipts and packing tape are tax-deductible. Spoiler alert: the rules changed recently, but some taxpayers (like active-duty military) still qualify for a deduction.
Helpful details:
- Currently, only active-duty military members moving under military orders are eligible to deduct moving expenses on their federal return.
- Qualifying expenses include transportation, storage up to 30 days, and travel costs (excluding meals).
- Even if you don’t qualify for a federal deduction, check if your state allows a moving expense deduction.
6. Save Big With Solar and Renewable Energy Credits
Eco-friendly upgrades don’t just help the planet—they can seriously lower your tax bill too. Homeowners who install solar panels or other renewable energy systems may qualify for substantial federal tax credits that cut the cost of their green improvements.
Helpful details:
- The federal solar tax credit is 30% of qualified expenses for systems installed between 2022–2032.
- Eligible systems include solar panels (photovoltaic systems), solar water heaters, geothermal heat pumps, small wind turbines, and battery storage technology (installed in 2023 or later).
- The Residential Clean Energy Credits are non-refundable on the tax return, but you can carry forward any unused amount to future years.
- Installation costs, including labor, permitting fees, and necessary wiring, count toward the total credit.
- Energy-efficient home upgrades, such as new insulation, windows, doors, and certain HVAC systems, may qualify for a separate credit with different annual limits and rules.
Final Thoughts: Small Moves, Big Tax Wins
Homeownership is expensive, no question about it. But with the right tax strategies in place, you can turn your biggest bills into meaningful savings—and keep more of your money where it belongs: in your pocket.
Ready to maximize your homeowner tax benefits? Lowe Levinson Financial Solutions is here to help you claim every credit, deduction, and advantage you’ve earned. Make an appointment today, and let’s get you set up for a smarter, richer future.
