The Success Guardian

10 Common Tax Deductions Every Homeowner Should Know

Owning a home can bring stability, pride—and a handful of tax benefits you shouldn’t miss. Whether you’re a first-time buyer or a long-time homeowner, understanding which deductions you can take can put hundreds or even thousands of dollars back in your pocket each year. This guide breaks down 10 common tax deductions, shows realistic examples, and includes a sample savings table so you can see the potential impact on your tax bill.

“Homeownership comes with both responsibilities and opportunities,” says John Hayes, CPA and tax adviser. “Knowing which deductions apply to you can turn routine maintenance into real tax savings.”

1. Mortgage Interest Deduction

One of the most valuable deductions for many homeowners is the mortgage interest deduction. If you itemize deductions on Schedule A, you can typically deduct interest paid on the mortgage used to buy, build, or substantially improve your primary or secondary home.

• Who it benefits: Homeowners with significant mortgage interest payments, especially in the early years of a mortgage.
• Limitations: Interest on mortgage debt up to $750,000 for mortgages taken out after December 15, 2017 (or $1 million for older mortgages) is generally deductible for married couples filing jointly. Rules change, so confirm with your CPA.

Example: If you have a $300,000 mortgage at a 4% interest rate, your first-year interest is roughly $12,000. At a 24% marginal tax rate, that could reduce your tax by about $2,880.

“Mortgage interest is often the single largest deduction for homeowners who itemize,” notes Maria Lopez, tax attorney. “It’s especially valuable when interest payments exceed the standard deduction.”

2. Property Taxes

You can generally deduct state and local property taxes you pay on real estate you own. This includes taxes on your primary and secondary residences.

• Key limit: The state and local tax (SALT) deduction — which includes property tax plus state income or sales tax — is capped at $10,000 ($5,000 if married filing separately).
• Example: If you pay $5,000 a year in property taxes and $6,000 in state income tax, you’ll hit the $10,000 SALT cap and can deduct that full amount if you itemize.

Example: A homeowner paying $4,000 in property taxes could reduce taxable income by that amount. At a 22% tax bracket, the tax savings would be about $880.

3. Mortgage Points (Origination Points)

When you buy a house, you might pay mortgage points to lower your interest rate. These points can often be deducted in the year you buy the home if they meet IRS rules, otherwise they may be amortized over the life of the loan.

• Typical cost: One point usually equals 1% of the loan amount. For a $250,000 mortgage, one point is $2,500.
• Deduction tip: Points paid on a mortgage to purchase your main home are usually deductible in the year of purchase, provided certain conditions are met.

“Points are an underused tax strategy. If you’re planning to keep the home long-term, buying points can save interest and offer a near-term deduction,” says Samantha Green, mortgage adviser.

4. Home Office Deduction

If you use a portion of your home regularly and exclusively for business, you may qualify for the home office deduction. This deduction applies whether you are self-employed or run a small business out of your home.

• Two methods: simplified (standard) deduction or actual expense method.
• Simplified method: $5 per square foot up to 300 sq ft (max $1,500).
• Actual expense method: Deduct a portion of utilities, mortgage interest, property taxes, insurance, repairs, and depreciation based on the business-use percentage of the home.

Example: If your home office is 200 sq ft and your home is 1,600 sq ft, the business-use percentage is 12.5%. On $6,000 of deductible home expenses, the portion attributable to the business would be $750.

5. Home Improvements for Medical Needs

Certain home improvements made for medical reasons may be deductible as a medical expense if they are primarily for the medical care of you, your spouse, or a dependent. These can include wheelchair ramps, widening doorways, or specialized heating/cooling equipment.

• Rule of thumb: Only the portion of the improvement that exceeds the increase in property value and that’s necessary for medical care can be deductible.
• Threshold: Medical expenses are deductible only to the extent they exceed 7.5% of your adjusted gross income (AGI) if you itemize.

Example: If a medical ramp costs $8,000 and increases home value by $1,500, the potentially deductible portion is $6,500. If your AGI is $80,000, you must first exceed $6,000 (7.5% of AGI) in medical expenses to get a deduction.

6. Energy-Efficient Home Improvements (Credits)

Unlike many deductions, energy-related tax breaks often come as tax credits (which reduce tax liability dollar-for-dollar). Homeowners who install qualified energy-efficient equipment—like certain solar panels, heat pumps, or insulation—may be eligible for federal energy tax credits.

• Common credits: Residential Renewable Energy Credit for solar electric systems, solar water heaters; and credits for energy-efficient windows, doors, and equipment under various programs (subject to eligibility rules).
• Example credits: Solar panel installation can qualify for a credit up to 26–30% of the cost, depending on the year and current law.

Example: Installing a solar system costing $18,000 could produce a federal credit of around $5,400 at a 30% rate (if applicable), directly reducing your tax liability.

7. Casualty and Theft Losses (Declared Disasters)

Casualty and theft losses are generally deductible only if they occur in a federally declared disaster area. If your region is declared a disaster area, you may be able to deduct losses not covered by insurance.

• Key points: Deductible amount is the loss minus insurance reimbursements and a $100 deductible per event, then reduced by 10% of AGI for the year.
• Examples include damage from hurricanes, tornadoes, or floods in federally declared disaster zones.

Example: If storm damage causes a $25,000 loss and you receive $15,000 from insurance, the unreimbursed loss is $10,000. Subtract $100, and then reduce by 10% of AGI (say $8,000 AGI → $800). The deductible amount would be $10,000 – $100 – $800 = $9,100.

8. Home Equity Loan Interest (With Limits)

Interest on home equity loans or lines of credit may be deductible if the loan funds are used to buy, build, or substantially improve the home that secures the loan. The same overall mortgage limits (e.g., $750,000) apply when combining primary mortgage and home equity debt.

• Example use: Using a $40,000 home equity loan to remodel a kitchen—interest could be deductible.
• Non-deductible uses: If you use home equity debt for personal expenses unrelated to the home (like paying off credit cards), the interest may not be deductible.

Example: A $40,000 home equity loan at 5% interest produces $2,000 annual interest. If fully deductible, that could reduce taxes by $2,000 × 22% = $440.

9. Depreciation for Rental or Business Use

If you rent out part of your home (a room, an accessory unit, or a separate rental unit), you can deduct depreciation for the portion used as rental property. Depreciation allows you to recover the cost of the property over time as a deduction.

• Allocation: You must allocate expenses between personal and rental use.
• Typical recovery period: Residential rental property is depreciated over 27.5 years using the MACRS system.

Example: If a $300,000 home has a rental portion representing 20% of the house, the depreciable basis (after subtracting land value) might be $240,000 × 20% = $48,000. Annual depreciation would be about $48,000 / 27.5 ≈ $1,745.

10. Points of Sale: Capital Improvements vs Repairs

Understanding the difference between capital improvements and repairs matters because capital improvements are added to your cost basis (reducing taxable gain when you sell), while repairs are generally deductible in the year incurred if related to rental or business use.

• Capital improvements: New roof, major remodeling, adding a deck. These are added to your basis and reduce capital gain when selling.
• Repairs and maintenance: Painting, fixing a broken window, minor plumbing repairs. Generally deductible in the year paid if tied to rental or business use.

Example: You spend $25,000 to replace a roof—this is a capital improvement. When you eventually sell, that $25,000 increases your cost basis and decreases taxable gain. In contrast, a $500 repair to a leak is usually deductible when it occurs (if business/rental) but does not affect basis.

“Tracking improvements carefully pays off at sale time,” says estate planner Daniel Kim. “Keep receipts, dates, and descriptions—your cost basis is paperwork-dependent.”

Sample Savings Table: How Deductions Translate to Tax Savings

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Deduction	Sample Amount	Tax Bracket Used	Estimated Tax Savings
Mortgage interest	$12,000	22%	$2,640
Property taxes (SALT limited)	$6,000	22%	$1,320
Mortgage points (1% on $250,000)	$2,500	22%	$550
Home office (actual allocation)	$1,200	22%	$264
Energy credit (solar install)	$18,000 cost, 30% credit	Tax credit	$5,400 (credit)
Home equity interest	$2,000	22%	$440

Note: The table above uses simplified assumptions for illustration. Tax brackets and rules vary. Energy credits reduce tax liability directly, while deductions reduce taxable income.

How to Decide Whether to Itemize or Take the Standard Deduction

For many taxpayers, the decision to itemize depends on whether your total itemizable deductions exceed the standard deduction. For 2024, the standard deduction is roughly $13,850 for single filers and $27,700 for married filing jointly (these figures can change — check current-year values).

• Example decision: If your mortgage interest ($12,000) plus property taxes ($6,000) plus charitable donations ($1,000) totals $19,000, and you’re single with a $13,850 standard deduction, itemizing could save you tax on the $5,150 difference.
• Tip: Even if you don’t itemize this year, keep records because some deductions (like capital improvements) affect basis when you sell your home.

Recordkeeping Tips

Good records make it easier to claim deductions and defend them in case of an audit. Keep documents like:

• Mortgage statements and closing disclosure forms
• Property tax bills and canceled checks or bank statements showing payment
• Receipts and invoices for home improvements, points, and energy upgrades
• Home office floor plans and records showing exclusive business use
• Insurance claims and damage estimates for casualty losses

“A shoebox of receipts won’t cut it,” says CPA John Hayes. “Use a folder or digital scanner app and keep items organized by year and category.”

Common Pitfalls to Avoid

• Assuming all improvements are deductible — many are capitalized and affect basis rather than current-year deductions.
• Failing to allocate expenses properly when part of the home is used for rental or business.
• Ignoring the SALT cap when planning your deductions.
• Not getting expert advice for large, unusual items like casualty losses or significant energy credits.

Quick Checklist Before Filing

• Do you have mortgage interest statements (Form 1098)?
• Have you tallied property taxes and other state/local taxes?
• Are receipts ready for energy-related purchases or home improvements?
• Do you have documentation for home office exclusivity and layout?
• Have you considered whether itemizing yields more benefit than the standard deduction?

Frequently Asked Questions

Q: Can I deduct expenses for short-term rentals (for example, Airbnb)?

A: If you rent out part of your home, you generally report rental income and may deduct rental-related expenses, including a portion of mortgage interest, property taxes, maintenance, and depreciation. Rules differ for short-term rentals, especially if personal use is significant.

Q: Are energy credits refundable?

A: Most residential energy credits are nonrefundable, meaning they reduce your tax liability to zero but don’t generate a refund beyond taxes owed. However, some credits have carryforward rules—check specific program details.

Q: How long should I keep home-related tax records?

A: Keep records for at least three years after filing, but for basis and capital improvements, retain records until you sell the home plus three years—often many years in practice. If you’re ever audited or if you claim depreciation, longer retention is prudent.

When to Consult a Professional

Tax advice can get complex, especially if you:

• Rent out part of your home or operate a business from home
• Claim large energy credits or casualty losses
• Have multiple properties or complicated mortgage arrangements

“The cost of a good tax adviser is often less than the value of missed deductions,” says tax attorney Maria Lopez. “If you’re unsure, a brief consultation can clarify what’s deductible and what should be capitalized.”

Final Thoughts

Homeownership brings several tax advantages, but they require attention and proper documentation. From mortgage interest and property taxes to energy credits and home office rules, understanding these 10 common deductions can help you maximize savings and avoid surprises.

Start by gathering your paperwork, estimating whether itemizing makes sense, and reaching out to a tax professional if your situation is complex. A few organized receipts and a basic understanding of these rules can translate into meaningful tax savings—year after year.

If you’d like, I can help you create a simple checklist tailored to your situation (e.g., mortgage balance, property tax amount, and any energy improvements) to estimate potential tax benefits. Just share a few numbers and your filing status.

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