Back Home2025 Homeowner Tax Advantages
Homeownership comes with several tax benefits that can help reduce your federal income tax bill. Some of the key 2025 homeowner tax advantages (deductions and credits) available to homeowners include:
- Mortgage Interest Deduction – You can deduct interest paid on your mortgage for your primary residence (and sometimes a second home) up to a limit ($750,000 for loans taken after Dec. 15, 2017; $1 million for older loans). You will find a summary of your mortgage interest payments on Form 1098, which lenders send out around the end of January.
- Property Tax Deduction – Increased SALT Deduction Cap: The cap for State and Local Taxes (SALT), which includes property taxes, has been raised from $10,000 to $40,000 for taxpayers with incomes under $500,000. This provides substantial relief for those in high-tax areas.
- Mortgage Points Deduction – If you paid discount points to lower your mortgage interest rate when purchasing or refinancing, you may be able to deduct them.
- Mortgage Insurance Premiums (PMI)– Premiums for private mortgage insurance are once again tax-deductible as mortgage interest for the 2025 tax year.
- Home Equity Loan Interest – Interest on home equity loans or HELOCs is deductible only if the funds were used to buy, build, or substantially improve the home securing the loan.
- Home Office Deduction – If you are self-employed and use a portion of your home exclusively for business, you can deduct a percentage of home-related expenses (utilities, insurance, etc.) or use a simplified $5-per-square-foot method.
- Energy-Efficient & Clean Energy Home Credits – Homeowners who install energy-efficient improvements (like solar panels, insulation, or energy-efficient windows) may qualify for tax credits. If you’ve installed new energy equipment to your home like solar panels, you may be eligible for the Residential Clean Energy Credit. That credit is worth 30% of the costs of new, qualified clean energy property that’s installed anytime from 2022 through 2032. There’s also the Energy Efficient Home Improvement Credit which covers upgrades that reduce home energy use. Improvements like insulation, central air conditioners and exterior doors may qualify. It’s a 30% credit up to $3,200 annually for changes made between 2023 and 2032 for upgrades such as heat pumps, energy-efficient windows and exterior doors. There’s even a credit available for installing electric vehicle recharging equipment at your home. The federal tax credit for EV chargers is worth 30% of the costs of the qualifying equipment, up to $1,000 per charging port.
- Capital Gains Exclusion – If you sell your primary home, you can exclude up to $250,000 in gains ($500,000 for married couples) from taxable income, provided you have lived in and owned the home for at least 2 or the last 5 years.
- Medically Necessary Home Modifications– Home modifications for medical purposes improve quality of life for those with health challenges. These adaptations make homes safer and more accessible, such as installing ramps or grab bars for mobility assistance.
This article should not be construed as professional tax advice. You need to consult with your professional tax advisor before filing your return.
Kim N. Bregman