Guide to Tax Deductions for Homeowners in 2025

SmartAsset Team

Sun, Mar 9, 2025, 2:56 PM 6 min read

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Owning a home comes with costs, but it also provides tax benefits that can lower your taxable income. For those filing taxes in 2025, deductions like mortgage interest and home office expenses have become more relevant with the rise of remote work. Some tax benefits have been long established, while others now apply to changing work situations. Knowing which deductions you qualify for can help maximize savings. A financial advisor could provide guidance on eligible deductions and tax compliance.

Tax deductions can help homeowners offset some of the costs associated with property ownership, potentially leading to substantial savings. These deductions apply to mortgage-related expenses, home improvements and certain state and local tax payments.

While many deductions remain the same year over year, recent legislative changes could impact eligibility or deduction limits in 2025. Here are six common homeowner tax deductions to note.

Mortgage discount points are fees paid to lenders at closing for the purpose of reducing a loan's interest rate. The IRS allows deduction of discount points on a primary residence as long as the mortgage meets specific requirements:

• Points paid on a home purchase loan are fully deductible in the year of payment if they are considered prepaid interest.

• If refinancing a mortgage, discount points must be deducted over the life of the loan rather than in a single year.

• The deduction is only available for points paid on a primary residence, not on investment or rental properties.

Homeowners can deduct state and local property taxes they pay each year. However, this deduction falls under the state and local tax (SALT) cap, which limits total deductions for state and local taxes, including property and income taxes. The cap is $10,000 for single filers and married couples filing jointly, or $5,000 for married individuals filing separately.

• This deduction is available for property taxes paid on a primary or secondary home but not on rental properties, which instead fall under business deductions.

• Taxes paid through an escrow account are deductible when actually paid to the tax authority, not when deposited into escrow.

One of the most valuable tax deductions for homeowners is the mortgage interest deduction, which applies to interest paid on a qualified home loan.

• The deduction is available for mortgage loans of up to $750,000 for single filers and married couples filing jointly, or $375,000 for married individuals filing separately.

• Homeowners who purchased their home before December 15, 2017, can deduct interest on mortgage loans up to $1 million.

• This deduction applies to primary and secondary residences, but not to investment properties.