1. Mortgage Interest Deduction

You may be able to deduct interest paid on a qualified mortgage secured by your main home or a second home. The deduction generally applies to money borrowed to buy, build, or substantially improve the home.

For qualifying mortgage debt taken out after December 15, 2017, interest is generally deductible on up to $750,000 of acquisition debt, or $375,000 if married filing separately. Older mortgages may qualify under different limits.

Interest on a home-equity loan or home-equity line of credit is not deductible merely because the loan is secured by your home. The proceeds generally must be used to buy, build, or substantially improve the home securing the loan.

Your lender will usually issue Form 1098 showing the mortgage interest received during the year. However, the amount on Form 1098 is not always the final deductible amount, so the loan balance, loan date, and use of the proceeds should be reviewed.

2. Real Estate Taxes

State and local real property taxes may be deductible when you itemize. The tax generally must be imposed on the property’s assessed value and charged uniformly within the taxing jurisdiction.

Property taxes are combined with state and local income taxes—or, if elected, general sales taxes—and certain personal property taxes under the federal state and local tax deduction, commonly called the SALT deduction.

Under current federal rules, the combined SALT deduction is generally limited to $40,000, or $20,000 for married taxpayers filing separately, subject to an income-based reduction. The allowed deduction will not be reduced below $10,000, or $5,000 for married filing separately.

Charges for water, sewer, trash collection, homeowners association fees, and assessments for local improvements are generally not deductible as real estate taxes. Some assessments may instead increase the home’s tax basis.

3. Mortgage Points

Points are certain charges paid to obtain a mortgage. If you paid points when purchasing your main home, you may be able to deduct the full amount in the year paid when all IRS requirements are satisfied.

Points paid to refinance a mortgage are generally deducted over the life of the new loan rather than all at once. Special rules may apply when part of the refinanced loan is used to substantially improve the home or when the mortgage is paid off early.

Review the Closing Disclosure and Form 1098 carefully, because a charge described as a “point” is not necessarily deductible interest.

4. Home Office Deduction

Self-employed homeowners may qualify for a home-office deduction if part of the home is used regularly and exclusively for business and the other requirements are met. Employees generally cannot claim a federal home-office deduction for working remotely.

Two calculation methods may be available:

• Simplified method: $5 per square foot of qualified business space, up to 300 square feet, for a maximum deduction of $1,500.

• Regular method: Deduct the business portion of eligible expenses such as mortgage interest, property taxes, utilities, insurance, repairs, and depreciation.

The regular method may produce a larger deduction, but it requires detailed records and may create depreciation recapture when the home is sold.

5. Rental Use of Part of the Home

If you rent a room, apartment, or another part of your home, you may deduct the rental portion of qualifying expenses. These may include mortgage interest, property taxes, insurance, utilities, repairs, and depreciation.

Expenses must be divided between personal and rental use using a reasonable method, such as square footage. Direct expenses that benefit only the rented area may generally be allocated entirely to the rental activity.

Rental income and expenses are usually reported on Schedule E. Special rules apply to short-term rentals, personal use of vacation homes, and rentals below fair market value.

6. Medically Necessary Home Improvements

Certain home improvements made primarily for medical care may qualify as itemized medical expenses. Examples can include entrance ramps, wider doorways, railings, modified bathrooms, or other accessibility improvements.

If an improvement permanently increases the value of the home, the deductible medical expense is generally limited to the cost exceeding that increase in value. Operating and maintenance costs for a medically necessary improvement may also qualify in some cases.

Medical expenses provide a federal deduction only to the extent total qualified expenses exceed the applicable percentage of adjusted gross income and the taxpayer itemizes.

7. Home Improvements and Your Tax Basis

Most repairs and improvements to a personal residence are not currently deductible. Painting a room, replacing a broken fixture, or repairing a leak generally does not create an immediate federal deduction.

However, capital improvements can increase the home’s adjusted tax basis, potentially reducing taxable gain when the property is sold. Examples may include:

• Adding a room or bathroom

• Replacing the roof

• Installing central air conditioning

• Completing a major kitchen renovation

• Adding permanent fencing or landscaping

• Installing certain energy systems

Keep invoices, contracts, proof of payment, permits, and before-and-after records for as long as you own the property and until the tax period for the sale has closed.

8. Tax Exclusion When Selling Your Main Home

This is an exclusion rather than a deduction, but it can be one of the most valuable homeowner tax benefits. A qualifying homeowner may exclude up to $250,000 of gain from the sale of a main home. Married couples filing jointly may qualify to exclude up to $500,000.

In general, the ownership and use tests require that the home was owned and used as a principal residence for at least two of the five years before the sale. Additional conditions and exceptions apply.

Depreciation claimed for business or rental use generally cannot be excluded and may be taxable when the home is sold. A sale may also need to be reported if Form 1099-S is issued, even when the gain is fully excludable.

9. Energy Credits: Check the Installation Date

Homeowners should be cautious about relying on older articles concerning federal residential energy credits. The Energy Efficient Home Improvement Credit and Residential Clean Energy Credit generally applied only to qualifying property placed in service through December 31, 2025. They are generally not available for improvements first placed in service in 2026.

If eligible property was installed in 2025, a credit may still be claimed on the 2025 return, subject to the applicable requirements, limits, and documentation rules. State, local, and utility incentives may still be available for later projects.

Itemizing Does Not Always Produce a Larger Benefit

Mortgage interest and property taxes generally benefit a homeowner only when total itemized deductions exceed the standard deduction. For tax year 2026, the federal standard deduction is $16,100 for single filers and married taxpayers filing separately, $32,200 for married couples filing jointly, and $24,150 for heads of household.

Before filing, compare the standard deduction with the total of mortgage interest, deductible taxes, charitable contributions, qualifying medical expenses, and other allowable itemized deductions.

Records Every Homeowner Should Keep

Maintain a permanent home file containing:

• Closing Disclosure and settlement statements from the purchase and any refinance

• Forms 1098 and property-tax bills

• Receipts and proof of payment for capital improvements

• Home-office calculations and business-use records

• Rental income and expense records

• Insurance and casualty-loss documentation

• Documents related to the eventual sale of the home

Good records can support current deductions and may substantially reduce taxable gain years later when the property is sold.

Final Thoughts

The best tax strategy depends on when the home was purchased, the mortgage balance, filing status, income level, business or rental use, and future plans for the property. A deduction that applies to one homeowner may not apply to another.

Before filing or starting a major home project, consult a qualified tax professional to determine which federal, state, and local tax benefits apply to your situation.

This article provides general educational information and is not legal or tax advice. Tax rules change, and individual circumstances vary.