Tax benefits of owning a home

Key takeaways:

• The IRS offers a tax credit and several deductions designed to lighten the financial load for homeowners.
• While there isn’t a current First-time home buyers Credit as was in the past, there is a credit and several deductions that can make owning a home more affordable.
• The home mortgage interest deduction allows you to subtract the interest you pay on your mortgage loans from your taxable income.
• The property tax deduction allows you to offset some of the financial burden of property taxes by deducting them from your taxable income.
• There is a provision for deducting private mortgage insurance premiums.
• The home equity loan interest deduction allows you to deduct the interest paid on qualifying home equity loans or lines of credit (HELOCs) from your taxable income.
• The home office deduction can help offset some of the expenses associated with maintaining a home office if you are self-employed or a gigger.
• HOA fees are not tax deductible for individual homeowners. However, if you own rental property or use your home for business purposes, you may be able to deduct a portion of your HOA fees as a rental or business expense.
• Work with a Jackson Hewitt Tax Pro to unlock these tax advantages and make the most of homeownership.

There are several IRS tax deductions available for homeowners

Owning a home isn't just about having a place to call your own. It's also often a smart financial move that can come with some significant tax benefits to lighten the financial load for homeowners.

Whether you're a first-time buyer or a seasoned homeowner, understanding these tax perks can help you maximize your savings and make the most of your investment. In this article, we'll explore some of the key tax benefits available to homeowners.

While there’s no current first-time home buyer tax credit there’s some tax relief available to prospective homeowners. By leveraging available deductions, such as mortgage interest and property tax deductions, new homeowners can find a measure of relief.

Mortgage Interest Credit

The mortgage Credit Certificate (MCC) program is a homebuyer assistance program designed to help lower-income families afford homeownership. The program allows homebuyers to claim a dollar-for-dollar tax credit for a portion of mortgage interest paid per year, up to $2,000. The remaining mortgage interest paid may still be calculated as an itemized deduction.

To be eligible, individuals must be first-time homebuyers, meet the program’s income and purchase price restrictions, and use the home as his/her primary residence.  The MCC must be applied for and approved before closing on your home purchase through an approved participating lender.

Homeowners claim the credit annually using IRS Form 8396. Mortgage Interest Credit.

Home mortgage interest deduction

One of the biggest tax benefits of homeownership is the home mortgage interest deduction. This deduction allows you to subtract the qualifying interest you pay on your mortgage loans from your taxable income, resulting in potential savings come tax time. The mortgage interest deduction also includes private mortgage insurance premiums and some points paid. Mortgage interest, qualifying points and private mortgage insurance expenses are typically reported to you annually on Form 1098, Mortgage Interest Statement.

However, there are some important things to keep in mind. To start, there are limits to how much mortgage interest you can deduct. You can deduct interest on mortgage loans up to $750,000 for married couples filing jointly ($375,000 for those filing separately) if your loan was taken out after December 15, 2017. The allowed interest was up to a principal amount of $1M prior to December 2017.

Additionally, you'll need to itemize your deductions on your tax return to claim the home mortgage interest deduction. This means instead of the standard deduction you will list out your qualifying expenses, like mortgage interest, property taxes, and other eligible expenses on Schedule A, Itemized Deductions, and submit it as part of your return package.

While the home mortgage interest deduction can result in significant tax savings for homeowners, it's essential to understand the specific rules and limitations that apply to your situation. Consulting with a Tax Pro can help ensure you maximize your deductions and take full advantage of this valuable tax benefit.

Are property taxes deductible?

Yes! Property taxes are a fact of life for homeowners, but the silver lining comes in the form of potential tax savings through the property tax deduction. This deduction allows homeowners to offset some of the financial burden of property taxes by deducting them from their taxable income.

The IRS allows you to deduct property taxes from your taxable income when you file your tax return. This means that the amount you pay in property taxes can help lower your overall tax bill, potentially resulting in significant savings.

The property tax deduction is an itemized deduction. This means that to claim it, you can choose not to use the standard deduction and instead itemize your deductions on Schedule A of Form 1040. For many homeowners, especially those with significant mortgage interest and other deductible expenses, itemizing can be a smart financial move.

It's also worth noting that there are some limits to the state and local tax deduction (SALT). In 2026, you can deduct up to $40,400 of all state and local taxes, including property taxes, if you're filing as a single taxpayer, married filing jointly, qualifying surviving spouse or as head of household. This cap is reduced to $20,200 if you're married filing separately. The cap is adjusted annually for inflation.

Overall, the property tax deduction can be a valuable tool for homeowners looking to save money on their taxes. By taking advantage of this deduction, you can ease the financial burden of property ownership and keep more of your hard-earned money in your pocket.

Is mortgage insurance tax deductible?

Starting with tax year 2026, homeowners are able to deduct private mortgage insurance premiums (PMI) as part of the mortgage interest deduction.

It's essential to stay informed about any updates or changes to tax laws that may affect your credits and deductions on your tax return. While certain deductions and credits may not currently be available, it's always a good idea to consult with a Tax Pro to ensure you're taking advantage of all available tax benefits as a homeowner.

Home equity loan interest deduction

If you’re looking to tap into your home's equity to fund major expenses, such as home improvements, college tuition, or debt consolidation, a home equity loan can be a valuable financial tool. But beyond providing access to funds, home equity loans may also offer a tax benefit in the form of the home equity loan interest deduction.

The home equity loan interest deduction allows you to deduct the interest paid on qualifying home equity loans or lines of credit (HELOCs) from your taxable income. This deduction can provide significant savings, making it an attractive option for those considering borrowing against their home equity.

To qualify for the home equity loan interest deduction, the loan must meet the IRS’s requirements. First, the loan must be secured by your primary or secondary residence. Second, the loan proceeds must be used to "buy, build, or substantially improve" the home that secures the loan. This means that using the funds for purposes, like home renovations or additions, typically qualifies, while using them for personal expenses, like vacations or shopping sprees, does not.

It's important to note that, like the mortgage interest deduction and property tax deduction, the home equity loan interest deduction is an itemized deduction. This means that instead of claiming the standard deduction, you'll need to itemize your deductions on Schedule A with Form 1040 to claim it.

Home office deduction

If you use part of your home for business purposes, you may be eligible to claim the home office deduction. This is a valuable tax benefit that can help offset some of the expenses associated with maintaining a home office.

To qualify for the home office deduction, the home office must be used for your self-employment, gig work, or contracting. Currently, employees are not eligible to claim the deduction. Your home office space must meet the requirements established by the IRS.

You must use your home office regularly and exclusively for conducting business. This could mean a place where you meet with clients, customers, or patients, and store products or samples, or where you provide daycare services. Personal activities, like paying bills or watching TV, don't count.

There are two methods you can use to calculate the home office deduction: the simplified method and the traditional long method.

The simplified method allows you to deduct $5 per square foot of your home office space, up to a maximum of 300 square feet. This method offers a straightforward way to calculate the deduction without the need for extensive record-keeping. This method does not include, or allow, depreciation.

Alternatively, you can use the traditional method, which involves calculating the actual expenses associated with your home office, such as mortgage interest, property taxes, utilities, and home maintenance and includes depreciation of the home office space. To determine the percentage of these expenses that can be attributed to your home office, you'll need to measure the square footage of your office space relative to the total square footage of your home.

It's essential to keep accurate records of your home office expenses and maintain documentation to support your deduction in case of an IRS audit. Additionally, if you're using the traditional method, you'll need to complete IRS Form 8829 to claim the deduction.

Are HOA fees tax deductible?

Homeowners' association (HOA) fees are a common expense for many homeowners. These fees typically cover the cost of maintaining shared amenities, such as landscaping, community pools, and security services. But when it comes to tax time, many homeowners wonder: Are HOA fees tax deductible?

In most cases, HOA fees are not tax deductible for individual homeowners. The IRS considers HOA fees to be personal expenses rather than deductible expenses related to the production of income.

However, there are some exceptions to this rule. If you own rental property or use your home for business purposes, you may be able to deduct a portion of your HOA fees as a rental or business expense. Additionally, if your HOA fees include assessments for specific improvements or services that directly benefit your property, such as repairs to your roof or maintenance of your driveway, you may be able to deduct those expenses as a home improvement or repair expense.

If you're unsure about whether you qualify for any deductions related to your HOA fees, it's a good idea to work with a Tax Pro who can provide personalized guidance based on your individual circumstances.

Consult a Jackson Hewitt Tax Pro to unlock these tax advantages

Navigating the complexities of homeownership and tax deductions can be daunting, but you don't have to go it alone. Whether you're a first-time homebuyer, a seasoned homeowner, or simply exploring the potential tax benefits of home-related expenses, consulting with a Tax Pro can help you unlock these tax advantages and maximize your savings.

Don't leave money on the table. Schedule an appointment with a Jackson Hewitt Tax Pro today to unlock these tax advantages and make the most of your homeownership journey.

About the Author

Mark Steber is Senior Vice President and Chief Tax Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.

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