In 2025, the standard deduction is:
$14,600 for Single filers
$29,200 for Married Filing Jointly
$21,900 for Head of Household
To benefit from mortgage-related deductions, your itemized deductions must exceed these amounts. For many new homeowners especially with lower loan balances or modest property taxes the standard deduction still offers a bigger tax break.
*Tip: Save your mortgage statements and property tax bills to calculate both options at tax time.
1. Mortgage Interest Deduction
You can deduct the interest paid on your mortgage — but only for the portion of the loan that qualifies:
Limit: Interest on up to $750,000 of qualified mortgage debt
Applies to primary residence and, in some cases, a second home
Must be a secured loan (can’t deduct interest on personal loans)
For many first-time buyers, this is the largest deductible expense in the first few years of homeownership because mortgage interest is front-loaded in amortization schedules.
For example:
On a $300,000 loan with a 6.5% rate, you might pay ~$19,000 in interest your first year potentially deductible if you itemize.
2. Property Tax Deduction
You can deduct state and local property taxes as part of the SALT deduction (State and Local Tax):
This deduction is often maxed out quickly in high-tax states, but still valuable if you itemize.
3. Mortgage Insurance Premiums (PMI)
In past years, PMI premiums were deductible, but as of 2025, that deduction has expired unless Congress extends it again.
Keep an eye on IRS updates and if PMI becomes deductible again, it may apply retroactively.
4. Residential Energy Credits
Making energy-efficient upgrades to your new home? You may qualify for:
Energy Efficient Home Improvement Credit (up to $1,200)
Residential Clean Energy Credit (up to 30% of installation costs)
Covered upgrades include:
Solar panels
Energy-efficient windows/doors
Heat pumps, insulation, battery storage
HVAC systems
Save receipts and installation certifications to claim these credits on your tax return.
5. First-Time Homebuyer Tax Credit (Not Active in 2025 — But Watch for It)
As of mid-2025, there is no federal first-time homebuyer tax credit. However, lawmakers have proposed bringing it back.
If passed later this year, a federal credit could offer up to $15,000 for qualifying first-time buyers. Check back during filing season or talk to a tax pro to see if you’re eligible.
In the meantime, some states offer:
First-time homebuyer savings accounts
Down payment assistance programs
Local tax incentives for homeowners
6. Home Office Deduction (Only for Self-Employed)
If you’re self-employed and work from home, you may qualify for the home office deduction even if you own rather than rent.
Requirements:
A portion of your home must be used exclusively and regularly for business
Deduct a percentage of your mortgage interest, utilities, property taxes, and repairs
Choose the simplified method ($5/sq. ft. up to 300 sq. ft.) or actual expenses
W-2 employees can’t claim this deduction, even if they work remotely.
7. Capital Gains When You Sell Your Home (For Future Reference)
It doesn’t apply when you first buy, but it’s good to understand the tax rule for selling your home later.
You may exclude up to $250,000 in gains ($500,000 if married) from taxes
Must have owned and lived in the home for 2 out of the last 5 years
So when the time comes to upgrade or relocate, you could walk away with tax-free profit.
