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Buying a home is a major milestone, but it’s also one of the biggest financial investments most people will ever make. What many homeowners don’t realize, though, is that owning property comes with several potential tax advantages. Knowing what you can (and can’t) deduct can help reduce your tax bill—and leave more money in your pocket at the end of the year.
Whether you’re a first-time buyer or a seasoned investor, this guide breaks down the most important real estate tax deductions every property owner should know heading into 2025.
1. Mortgage Interest Deduction
One of the most significant and widely used tax deductions for homeowners is the mortgage interest deduction. If you itemize your deductions, you can deduct the interest paid on your mortgage for a primary residence—and in some cases, a second home.
Key Points:
- As of 2025, interest is deductible on up to $750,000 of mortgage debt (for loans taken out after December 15, 2017).
- For loans before that cutoff, the limit is $1 million.
- Interest on home equity loans or lines of credit (HELOCs) is also deductible, but only if the funds were used to buy, build, or improve the home.
This deduction can mean thousands in savings each year, especially early in the mortgage when most payments go toward interest.
2. Property Taxes
Property taxes are another major expense for homeowners—but the good news is they’re deductible too.
As of 2025, the state and local tax (SALT) deduction allows you to deduct up to $10,000 total for property taxes combined with state income or sales taxes.
If you live in a high-tax state, this cap can be a limiting factor, but for many average homeowners, it still offers meaningful savings.
Tip: Keep detailed records of your annual tax bill and any special assessments to ensure you’re claiming the full amount.
3. Private Mortgage Insurance (PMI)
If you bought your home with a down payment of less than 20%, chances are you’re paying private mortgage insurance (PMI). While it’s often seen as an added cost, PMI may be tax deductible depending on your income.
Deduction limits (subject to income thresholds):
- The deduction begins to phase out for taxpayers with an adjusted gross income (AGI) over $100,000, and disappears entirely at $109,000.
Though Congress has gone back and forth on extending this deduction, as of now, it’s still available through 2025. Keep an eye on changes in tax law, as this could be extended—or phased out.
4. Home Office Deduction (Self-Employed Owners)
If you’re self-employed and use part of your home exclusively for business purposes, you might be able to deduct expenses related to that space.
Qualifying deductions include:
- A portion of your mortgage interest and property taxes
- Utilities and home maintenance costs
- Internet, repairs, or even depreciation
Note: W-2 employees who work from home cannot take this deduction due to changes in the tax code under the Tax Cuts and Jobs Act. It’s strictly for self-employed individuals, freelancers, and small business owners.
5. Energy-Efficient Upgrades
If you’ve made environmentally friendly upgrades to your home—like installing solar panels, energy-efficient windows, or heat pumps—you may qualify for a federal energy tax credit.
As of 2025, homeowners can claim:
- 30% of the cost of qualified improvements through the Residential Clean Energy Credit.
- This includes solar electric, solar water heaters, and geothermal heat pumps.
There are maximum limits for certain items (e.g., $600 for windows), so be sure to check the current IRS guidelines. These incentives not only save you money on taxes but can also lower your energy bills year-round.
6. Capital Gains Exclusion
When you sell your home, you may be eligible for a capital gains tax exclusion on the profit—up to $250,000 for individuals and $500,000 for married couples filing jointly.
To qualify:
- The home must be your primary residence.
- You must have lived in the home for at least two of the last five years before selling.
This means you could make a significant profit on the sale of your home and pay no taxes on that gain, as long as you meet the IRS criteria. This is one of the most powerful tax benefits of owning a home.
7. Depreciation (Investment Property Owners)
For landlords and real estate investors, the tax advantages are even greater. One of the biggest is depreciation—a non-cash deduction that allows you to write off the cost of a rental property over 27.5 years.
How it works:
- You can deduct a portion of the property’s value (excluding land) each year.
- This reduces your taxable rental income, even if the property is appreciating in value.
Combined with deductions for repairs, maintenance, and travel, depreciation can make rental income extremely tax-efficient.
8. Home Improvements for Medical Needs
If you’ve made upgrades to your home specifically for medical reasons, like adding wheelchair ramps, widening doorways, or installing lifts, these may be deductible as medical expenses.
To qualify:
- The improvements must be medically necessary and recommended by a doctor.
- Only the portion of the expense that doesn’t increase the property’s value is deductible.
You must itemize and your total medical expenses must exceed 7.5% of your adjusted gross income.
9. Moving Expenses (Military Only)
While most taxpayers can no longer deduct moving expenses, active-duty members of the military who move due to a permanent change of station can still deduct the costs.
This includes:
- Transportation
- Lodging
- Packing and shipping household goods
Be sure to keep all receipts and documentation related to the move.
10. Points Paid at Closing
When you buy a home, you may pay “points” (also known as loan origination fees) to reduce your mortgage interest rate. These points are typically deductible in the year you buy the home, as long as certain IRS conditions are met.
For refinances, points must usually be amortized over the life of the loan rather than deducted all at once.
Final Thoughts
Real estate can be a powerful tool for building wealth, but it’s also loaded with hidden opportunities to save money—if you know where to look. From mortgage interest to energy credits, there are plenty of tax breaks available to smart homeowners and investors.
Tax laws are complex and constantly changing, so it’s wise to work with a qualified tax advisor who understands real estate. Taking the time to understand and apply these deductions can significantly lower your tax bill and increase your long-term financial health.
Owning a home isn’t just about where you live—it’s also about how you manage one of your most important financial assets.
