Most homeowners know they can deduct mortgage interest, but many other tax breaks apply for the 2025 tax season. These benefits appear as deductions, which lower taxable income, and tax credits, which directly reduce the amount owed.
To access most home-related deductions, homeowners must itemize instead of taking the standard deduction:
- $15,750 for single filers
- $31,500 for married filing jointly
- $23,625 for heads of household
Tax credits can be used whether you itemize or not.
Mortgage Interest Deduction
The mortgage interest deduction remains one of the most valuable benefits for homeowners.
- Deduct interest on mortgage debt up to $750,000 for single or joint filers
- Up to $1 million for mortgages originated before Dec. 15, 2017
- Married filing separately deducts half the limit
- Amount appears on Form 1098 and is listed on Schedule A
This deduction helps reduce taxable income significantly, especially for new homeowners with higher interest payments.
Deducting Mortgage Points
Mortgage points (or discount points) count as prepaid interest.
- Added to total deductible mortgage interest
- Reported on Schedule A
- Especially helpful for homeowners who paid points upfront to lower long-term rates
Mortgage Credit Certificate (MCC)
First-time homebuyers with an MCC may qualify for a mortgage interest tax credit worth:
- 10%–50% of annual mortgage interest
- Up to $2,000 per year
- Claimed using Form 8396
- Does not require itemizing
MCCs are available through local and state housing programs.
Property Tax Deduction: Major 2025 Update
The One Big Beautiful Bill expanded the deduction limit for state and local taxes (SALT):
- New limit: $40,000, replacing the previous $10,000 cap
- Includes property taxes and other state and local taxes
- Begins phasing out at higher incomes
- Entered on Schedule A with receipts or lender statements
This is one of the most homeowner-friendly updates for 2025.
Home Office Deduction for Self-Employed Workers
Self-employed homeowners using part of their home exclusively and regularly for business can deduct related expenses.
Two methods apply:
- Simplified Option:
- $5 per square foot
- Up to 300 sq. ft.
- $5 per square foot
- Regular Method:
- Deducts a percentage of actual home expenses (utilities, wear, maintenance)
- Deducts a percentage of actual home expenses (utilities, wear, maintenance)
Deduction is calculated with Form 8829.
Remote employees generally cannot claim this deduction unless they meet specific IRS rules.
Energy Tax Credits for 2025
Residential Clean Energy Credit
Covers 30% of costs for renewable systems such as:
- Solar
- Wind
- Geothermal
Claimed using Form 5695.
Energy Efficient Home Improvement Credit
Includes fixed credits and 10% reimbursements for improvements like:
- Insulation
- Energy-efficient windows or doors
- Certain roofing updates
- Energy Star appliances
Both credits expire after the 2025 tax year.
EV Charger Installation Credit
Homeowners who install an electric vehicle charging station can claim:
- 30% of installation cost, up to $1,000
- Claimed through Form 8911
- Available until June 30, 2026
Home Equity Loan Interest Rules
Interest on home equity loans is deductible only if the loan is used to:
- Buy
- Build
- Improve your home
Interest for personal expenses (vacations, debt, etc.) is not deductible.
Report eligible interest along with mortgage interest on Schedule A.
Capital Gains and Cost Basis When Selling a Home
Home improvements increase your cost basis, which can reduce taxable gains when selling. Qualifying improvements include:
- Roofing
- HVAC upgrades
- New flooring
- Additions
- Major landscaping projects
Homeowners who lived in the property for two of the last five years may exclude:
- Up to $500,000 in gains (married filing jointly)
- Up to $250,000 (single filers)
Use Form 8949 if gains exceed the exclusion or if you receive a Form 1099-S.
Medical-Related Home Improvements
Certain accessibility and medical-related improvements qualify as deductions when total medical expenses exceed 7.5% of AGI, such as:
- Ramps
- Safety bars
- Lifts
- Widened entryways
These are included with other medical costs on Schedule A.
Home Expenses That Are Not Deductible
Some common home expenses do not qualify for tax breaks:
- Mortgage principal
- Down payments
- Utilities
- Homeowner’s insurance
- Routine cleaning or maintenance
- General landscaping
- Depreciation on a primary residence
These are considered personal expenses.
When to Seek Professional Guidance
Tax rules vary based on income, filing status, home use, and state laws. A tax professional can help determine:
- Whether to itemize
- Which credits apply
- How new 2025 updates affect your home tax benefits
