Homeowners

What Homeowners Need to Know Before Filing Their Taxes

Tax season is approaching, and if you own a home, your return may be a little more complicated. However, it could also be much cheaper.

Owning a home unlocks valuable deductions and credits that can lower your tax bill or even boost your refund. But between mortgage interest, property taxes, and energy-efficient home improvements, figuring out what applies to you can feel overwhelming.

Not to worry—we’ve got you covered. Whether you’re filing as a homeowner for the first time or you’re a seasoned tax expert, here’s a guide to navigating your return like a pro.

Mortgage interest deduction: A homeowner’s biggest tax perk

If you’re still paying off your home, you can probably deduct some or all of your mortgage interest. This is often one of the biggest deductions you can get.

Here’s how it works:

• If your mortgage was secured before Dec. 15, 2017, you can deduct interest on loans up to $1 million.
• If you bought your home after that date, the cap is $750,000 for single filers and married couples filing jointly (or $375,000 each for married folks filing separately).
• Refinanced? You can still deduct interest, but only on the part of the loan used to buy, build, or improve your home.

“There are certain requirements for eligibility (including additional requirements for second properties), and the limit for deduction can vary depending on when you first purchased your home,” said Adam Hamilton, co-founder of REI Hub, a bookkeeping software for landlords.

Tip: Keep records of how refinancing funds are used. The IRS doesn’t let you deduct interest on cash-out refis used for things like paying off credit cards—only home improvements count.

Property taxes and the SALT deduction

If you’ve been hoping for a change to the state and local tax (SALT) deduction cap, it’s still stuck at $10,000 ($5,000 if you’re married and filing separately).

That means you can deduct up to $10,000 in state and local property taxes, along with either state income tax or sales tax—but no more. This deduction is especially important for homeowners in high-tax states like California, New York, and New Jersey.

Tip: If you’re in a high-tax state, consider prepaying your property taxes before year-end. It could help you hit the deduction limit this year instead of missing out later.

Paid points on your mortgage? Don’t leave money on the table

Did you pay points when you took out your mortgage to lower your interest rate? Good news: Those points may be deductible—but how you deduct them depends on why you paid for them.

• If the points were for a new home purchase, you can deduct the full cost in the year you bought your home.
• If they were part of a refinance, you must deduct them gradually over the life of the loan.

Look for Form 1098 from your lender. It will show you the amount of interest and points you paid in 2024.

Tip: If you refinanced but then paid off the loan early (like selling your home), you can deduct all remaining points at once.

Home office deduction: Who qualifies?

Working from home? If you’re self-employed and use part of your home exclusively for business, you could be eligible for a home office deduction.

You can choose between:

1. Simplified method: Deduct $5 per square foot (up to 300 sq. ft.).
2. Regular method: Deduct a percentage of your home’s expenses (mortgage interest, property taxes, utilities, etc.) based on how much space your office takes up.

If you’re a W-2 employee working remotely, unfortunately, you don’t qualify for this deduction—only self-employed folks do.

Tip: To avoid IRS scrutiny, make sure your home office space is used exclusively for work. If it doubles as a guest room, you won’t qualify.

Energy efficiency tax credits

If you made energy-efficient upgrades to your home in 2024, you may be eligible for up to a 30% tax credit on the cost of things like:

• New windows and doors (up to $600).
• Heat pumps, central air conditioners, and insulation (up to $1,200).
• Solar panels (30% of the total cost, no cap).

Unlike deductions (which lower taxable income), tax credits reduce what you owe dollar-for-dollar—making them especially valuable.

Tip: To qualify, products must meet Energy Star standards.

“An Energy Star-certified roof installation by our roofing client in the previous year earned them a tax credit refund that covered 26.3% of the roof costs,” said Daniel Roberts, CEO of Lava Roofing. “Residential property owners fail to recognize all the potential value returns from sustainable home improvements.”

What if you rent out part of your home?

If you Airbnb a spare room or rent out your basement, the IRS expects you to report that income.

But the good news? You can also deduct expenses like mortgage interest, property taxes, repairs, and depreciation—lowering your taxable income.

If you rent out your home for fewer than 14 days per year, the IRS doesn’t require you to report the income. That means short-term rentals during big events (like the Super Bowl) can be completely tax-free.

Tip: Use rental property management software to track income and expenses—it’ll make tax time much easier.

Standard deduction vs. itemizing: What’s best for you?

The IRS has made a few changes for the 2024 tax year that homeowners should consider during this tax season. The standard deduction is the simpler, no-fuss option—a flat amount that reduces your taxable income without requiring receipts or calculations.

Meanwhile, itemizing allows you to tally up everything from mortgage interest and property taxes to medical expenses and charitable contributions to see if your deductions add up to more.

So, which should you choose? The one that gets you the biggest tax break.

Current standard deduction amounts for 2024:

• Single: $14,600
• Married filing jointly: $29,200
• Head of household: $21,900

Tip: Homeowners who just bought or refinanced should take a closer look at itemizing. Mortgage interest is typically highest in the first years of a loan, making it more likely get you above the standard deduction threshold.

If you didn’t itemize last year, you probably won’t need to this year—unless you had major expenses. But when in doubt, run the numbers both ways to make sure you’re maximizing your refund.