You may get money back at tax time if you own a home, but only if you itemize deductions and meet certain conditions

Homeownership can reduce the federal income tax you owe, but the benefit does not happen automatically. The IRS allows homeowners to deduct certain expenses on their tax return — mainly mortgage interest and property taxes — but only if you choose to itemize deductions instead of taking the standard deduction. For most homeowners, this means comparing two paths on your tax return and picking the one that saves you more money. If you are getting a refund, it means you paid more in taxes throughout the year than you actually owed, and the homeownership deductions may have lowered what you owed.

The key point: homeownership deductions reduce your taxable income, which can lower your tax bill or increase your refund. They do not create a refund by themselves.

Key Takeaways

  • Mortgage interest and property taxes are the main homeownership expenses you can deduct, but only if you itemize deductions on your tax return.
  • You must choose between itemizing deductions or taking the standard deduction — you cannot do both, so compare the two amounts to see which saves you more.
  • The standard deduction is higher for most people than the value of homeownership deductions alone, which is why many homeowners do not benefit from itemizing.
  • State and local taxes (including property taxes) are capped at $10,000 per year for federal tax purposes, which limits the deduction for high-tax states.
  • A tax professional or free tax software can show you whether itemizing would lower your tax bill more than the standard deduction.

What homeownership expenses can you deduct

The two main deductions available to homeowners are mortgage interest and property taxes. Mortgage interest is the portion of your monthly payment that goes toward interest rather than paying down the principal — your lender sends you a Form 1098 each January showing how much interest you paid the previous year. Property taxes are the annual taxes your city or county charges based on your home's assessed value.

You cannot deduct the principal portion of your mortgage payment, homeowners insurance, maintenance costs, utilities, or HOA fees. These are personal expenses, not deductible ones. You also cannot deduct mortgage interest if you take the standard deduction instead of itemizing.

Some homeowners can also deduct mortgage insurance premiums (PMI) if they meet income limits, though this deduction has expired and been reinstated several times. Check the current year's rules with a tax professional or the IRS website before counting on this.

Itemizing versus the standard deduction

To use homeownership deductions, you must itemize deductions on Schedule A of your tax return. This means listing out all your deductible expenses — mortgage interest, property taxes, charitable donations, medical expenses, and others — and adding them up. The IRS then compares this total to the standard deduction, a flat amount that changes each year based on your filing status and age.

For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. If your itemized deductions add up to more than the standard deduction, you itemize and get the larger deduction. If they add up to less, you take the standard deduction instead. Most homeowners find that the standard deduction is larger, which means homeownership deductions do not help them.

Example: A married couple with $8,000 in mortgage interest and $6,000 in property taxes has $14,000 in itemized deductions. The standard deduction for married couples is $29,200, so they would take the standard deduction and get no benefit from the homeownership deductions.

The $10,000 cap on state and local taxes

Federal tax law limits the deduction for state and local taxes (SALT) to $10,000 per year, regardless of how much you actually pay. This cap includes property taxes, state income taxes, and local income taxes combined. For homeowners in high-tax states, this means property taxes alone may hit the $10,000 limit, leaving no room to deduct state income tax.

This cap has been in place since 2017 and is currently set to expire after 2025, though Congress may extend it. Check current law before filing, as the rules may change.

Example: A homeowner in New York pays $12,000 in property taxes and $8,000 in state income tax, for a total of $20,000 in SALT. They can only deduct $10,000 of this amount on their federal return.

When homeownership deductions actually help

Homeownership deductions are most valuable for people with high mortgage balances, high property taxes, or other large deductible expenses. If your itemized deductions (including mortgage interest, property taxes, and other deductions like charitable donations) exceed the standard deduction, then itemizing saves you money.

This is more common for homeowners who recently bought a house with a large mortgage, who live in high-tax states, or who have significant charitable donations or medical expenses in addition to homeownership costs. It is less common for people with smaller mortgages, lower property taxes, or who have paid off their homes.

A tax professional or free tax software like IRS Free File can calculate both scenarios for you and show which approach saves more money in your specific situation.

How homeownership deductions affect your refund

A tax refund happens when you have paid more in taxes throughout the year (through paycheck withholding or estimated payments) than you actually owe. Homeownership deductions lower the amount of tax you owe by reducing your taxable income. If you owe less, and you have already paid the same amount through withholding, you get a larger refund.

However, homeownership deductions do not create a refund on their own. They only increase a refund you would already be getting, or reduce a tax bill you would owe. If you are not getting a refund without homeownership deductions, adding them may not change that — it depends on your total income, withholding, and other deductions.

First-time homebuyer considerations

First-time homebuyers often expect homeownership to lower their taxes significantly, but the reality depends on the size of the mortgage and local property taxes. In the first year of homeownership, your mortgage interest deduction is largest because most of your early payments go toward interest rather than principal. As years pass, less of each payment is interest, so the deduction shrinks.

If you are a first-time buyer with a large mortgage in a high-tax area, homeownership deductions may help you itemize. If you have a smaller mortgage or live in a low-tax state, the standard deduction will likely still be larger, and you will not see a tax benefit.

Frequently Asked Questions

Do I have to itemize to get a homeownership tax deduction?

Yes. Mortgage interest and property taxes are only deductible if you itemize deductions on Schedule A. If you take the standard deduction instead, you cannot use these deductions. You must choose one or the other, not both.

Will paying off my mortgage increase my tax refund?

No. Paying off your mortgage eliminates the mortgage interest deduction, which may actually reduce your refund or increase a tax bill. However, you will no longer have monthly mortgage payments, which saves you money in a different way.

Can I deduct HOA fees or home repairs?

No. HOA fees, maintenance, repairs, utilities, and homeowners insurance are not deductible on your federal tax return. Only mortgage interest, property taxes, and mortgage insurance premiums (under certain conditions) are deductible.

What if I own a rental property instead of a primary home?

Rental properties have different rules. You can deduct mortgage interest, property taxes, repairs, utilities, insurance, and depreciation as business expenses. Consult a tax professional, as rental property taxes are more complex than primary home taxes.

How do I know if I should itemize or take the standard deduction?

Add up all your itemized deductions (mortgage interest, property taxes, charitable donations, medical expenses, and others) and compare the total to the standard deduction for your filing status. If the total is higher, itemize. If it is lower, take the standard deduction. Tax software will calculate both for you automatically.