The Tax Benefits of Owning a Home: What Every Homeowner Should Know

Owning a home comes with more than just personal and financial stability—it can also unlock valuable tax advantages. If you’re a homeowner or planning to become one, understanding the tax benefits available to you can lead to meaningful savings at tax time.

This guide breaks down the most common tax deductions for homeowners, explains eligibility rules, and highlights tax strategies that apply to first-time buyers, long-time owners, and even those with second homes or investment properties.

What Are the Tax Benefits of Owning a Home?

The tax benefits of owning a home are primarily offered through deductions and exclusions that reduce your taxable income. These include:

• Mortgage interest deduction

• Property tax deduction

• Capital gains tax exclusion on the sale of your primary residence

• Credits and deductions for energy-efficient upgrades

• Certain benefits for second homes or rental properties

These deductions are generally available only if you itemize, and they’re subject to limitations and eligibility rules.

Mortgage Interest Deduction

One of the most well-known homeowner tax benefits is the mortgage interest deduction. If you itemize your deductions, you may be able to deduct interest paid on up to $750,000 of mortgage debt (or $375,000 if married filing separately) for homes purchased after December 15, 2017. However, older loans may qualify under the previous $1 million cap.

This deduction applies to both primary residences and qualifying second homes, but not to investment properties.

Learn more in our article on the mortgage interest deduction and how it’s calculated.

Property Tax Deduction (SALT Cap)

Homeowners can also deduct state and local taxes paid, including property taxes. The IRS places a cap on this deduction under the State and Local Tax (SALT) limit:

• You may deduct up to $10,000 total in state and local income, sales, and property taxes combined ($5,000 if married filing separately).

This cap, introduced in 2018, limits the benefit for homeowners in high-tax states, but remains one of the key deductions available.

Capital Gains Exclusion When Selling a Home

If you sell your primary residence for more than you paid for it, you may be eligible to exclude some or all of the gain from your taxable income.

• Up to $250,000 of gain can be excluded for single filers

• Up to $500,000 for married couples filing jointly

To qualify, you must have owned and lived in the home for at least two of the last five years before the sale. This exclusion can be used once every two years.

Tax Benefits for Second Homes and Investment Properties

If you own a second home, you may still be able to deduct mortgage interest and property taxes. However, the home must be used for personal purposes at least 14 days per year or 10% of the days it’s rented—whichever is greater.

The IRS treats rental properties as investments, offering a different set of tax advantages, including:

• Depreciation deductions

• Deductible maintenance and repair costs

• Deductible mortgage interest and property taxes

• Pass-through income deductions in some cases

Tax Breaks That Are Reduced or No Longer Available

Some homeowner-related tax deductions have changed or expired:

• Mortgage insurance (PMI) deduction is currently expired as of 2023 unless extended by future legislation

• Home equity loan interest is only deductible if the loan was used to buy, build, or improve the home

• Moving expense deduction is no longer available for most taxpayers, with an exception for active-duty military

If you need a refresher on mortgage insurance, visit our article: What Is PMI?

Do You Need to Itemize to Claim These Deductions?

Yes, most of the tax benefits of owning a home require itemizing. That means your total deductions must exceed the standard deduction amounts set by the IRS:

If your total deductions fall short of these amounts, it may make more sense to take the standard deduction and forgo individual write-offs like mortgage interest and property taxes.

FAQ: Tax Deductions for Homeowners