Potential Tax Benefits for Homeowners: What You Need to Know
Owning a home can be one of life’s most rewarding milestones—but it’s also one of the biggest financial commitments. The good news? The IRS offers several tax benefits to help ease the financial burden of homeownership. If you're a homeowner, or thinking about becoming one, it's worth understanding which home-related expenses may be deductible and what programs or allowances could reduce your tax bill.
Let’s break down the key tax benefits available to homeowners.
Deductible House-Related Expenses
If you own a home and itemize your deductions, you may be eligible to deduct certain costs associated with your home. While most people bundle multiple housing expenses into their monthly mortgage payment, not all of them are deductible.
You Can Deduct:
Mortgage Interest:
Interest paid on a home mortgage may be deductible, subject to IRS limits (typically up to $750,000 of mortgage debt for loans taken after December 15, 2017).State and Local Real Estate Taxes (SALT):
You can deduct up to $10,000 ($5,000 if married filing separately) in combined state and local property, income, and sales taxes.
Note: These deductions are only available if you itemize. If you take the standard deduction, you cannot also deduct these homeownership expenses.
You Cannot Deduct:
Not all home-related costs are tax-deductible. The following are not eligible for a deduction:
Mortgage principal payments (reducing your loan balance)
Homeowner's insurance or title insurance
Utilities (gas, electricity, water, internet, etc.)
Homeowners’ association (HOA) or condominium fees
Home repairs or maintenance
Depreciation of your home
Domestic help wages
Most settlement or closing costs
Forfeited deposits or down payments
Understanding the distinction between deductible and non-deductible costs helps avoid surprises when filing your taxes.
Mortgage Interest Credit (MCC)
The Mortgage Interest Credit is a special tax credit designed to help low- to moderate-income individuals afford homeownership.
Key Details:
To qualify, you must have been issued a Mortgage Credit Certificate (MCC) by a state or local government agency, usually during the home purchase process.
The credit allows eligible homeowners to claim a percentage of the mortgage interest paid each year as a direct reduction of their tax bill.
Unlike a deduction (which lowers your taxable income), a credit directly reduces the amount of tax you owe, making this benefit particularly valuable.
Ministers and Military Housing Allowances
Ministers and members of the uniformed services who receive a nontaxable housing allowance can still benefit from major homeowner tax deductions.
Even though the housing allowance is not considered taxable income, these individuals can still deduct mortgage interest and real estate taxes on their tax returns.
There is no need to reduce the deductions based on the allowance received.
This special rule provides meaningful tax relief and recognizes the unique nature of housing support provided to clergy and military personnel.
Final Thoughts
While owning a home involves significant financial responsibility, the tax code offers ways to reduce the cost. Whether you're a first-time buyer or a long-time homeowner, it’s important to understand which benefits apply to your situation—and to keep organized records throughout the year.
When in doubt, consult with a tax professional. They can help you navigate complex rules, ensure you’re getting the deductions and credits you qualify for, and make the most of your investment in homeownership.
