Tax deductions and exemptions for homeowners

Learn about tax breaks when you own a home

When you own a home, you may be eligible for deductions and exemptions that can help lower the amount of taxes you pay. To better understand whether you qualify for a current tax break and which ones make sense for you to claim, consult your tax professional.

Are property taxes deductible?

Yes. You can usually deduct the cost of local or state property taxes from your federal taxes. You will need to itemize your deductions, rather than taking the standard deduction, to deduct your property taxes.

The amount you can deduct in property taxes is limited by IRS rules. In 2024, individuals can deduct up to $5,000 and couples filing jointly can deduct up to $10,000. Furthermore, these limits include deductions you might also take for state and local income and sales taxes. That is, the combined total deduction for state and local income, sales, and property taxes is limited to $5,000 for individuals and $10,000 for couples. See the IRS website to learn more.

Are there tax credits for energy-saving home improvements?

Yes. There are residential energy efficient property credits for which you may qualify. These credits can cover improvements such as installing energy efficient windows and doors, roofs, and insulation. Upgrading to energy efficient heating and cooling systems or an efficient water heater can qualify. There are credits for installing alternative energy systems like solar panels too. Learn more about solar power.

To claim these tax credits, you need to have made a qualifying improvement during a defined period of time. To learn more, see these IRS questions and answers.

Can you exclude capital gains taxes when you sell a home?

Yes. When you sell your home, you can qualify to exclude up to $250,000 of the capital gain from your taxes when you file as an individual and up to $500,000 when you file as a couple. To qualify, you need to meet minimum requirements for the length of time you owned the home as well as the length of time you used it as your primary residence.

You may also be able to deduct the cost of substantial home improvements from your capital gains. The improvements can include the addition of a room, garage, patio, or deck. The cost of installing new windows, doors, sidings, and roofs can reduce your gains. Upgrading heating and cooling systems, electrical systems, and plumbing can reduce your gains. Other improvements count too. To deduct these costs, you will need to keep records of all improvements that meet the government’s standards.

Are there other tax deductions for homeowners?

Yes. There are deductions for self-employed people who have a home office. Also, you may be able to deduct the cost of home improvements you need to make as the result of a health condition. If you rent part of your home to a tenant, you may be able to deduct expenses associated with the rental space. The rules for these breaks can be complicated so ask your tax professional whether you qualify. You may also qualify for a homestead tax exemption.

What homeowning expenses are not tax deductible?

Many costs of owning a home are not tax deductible. The cost of routine maintenance and repairs that do not substantially improve your home are not deductible. You cannot deduct the cost of homeowners insurance, utility and internet bills, homeowners association (HOA) fees, or condominium fees from your taxes. Costs associated with buying a home, like down payments and closing costs, are typically not deductible either.

*Freedom Mortgage Corporation is not a financial advisor. The ideas outlined above are for informational purposes only, are not intended as investment or financial advice, and should not be construed as such. Consult a financial advisor before making important personal financial decisions and consult a tax advisor regarding tax implications and the deductibility of mortgage interest and charges.

Last reviewed and updated August 2024 by Freedom Mortgage.