Do You Get a Tax Break for Buying a Home? 8 Essential Homebuyer Tax Credits

Written by  Rene Bermudez

Written by  Theresa Stevens

Edited by  Anna-Louise Jackson

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Updated Aug 01, 2025 Content was accurate at the time of publication.

The short answer is yes, you can get a tax break for buying a home, which can help you save money at tax time. But first, you have to know which of your expenses qualify and whether you want to itemize your deductions or take the standard deduction.

We’ll go over eight homebuyer tax credits and deductions every homeowner should know about before they file their taxes. We’ll also cover some more niche tax breaks that apply when you sell your home or use it for certain special purposes

What are tax breaks: Deductions and credits explained

The tax benefits of homeownership can come in the form of a tax deduction or a tax credit.

Understanding the standard deduction vs. itemized deductions

Before we cover the different tax breaks for homeowners, it’s important to understand the difference between the standard deduction and itemizing your deductions:

Takeaway: For most people, it makes sense to take the standard deduction rather than itemize, but if the deductions you qualify for add up to more than the standard deduction, then it may make more sense for you to itemize. Consult a tax professional if you’re unsure which strategy makes the most sense for you.

Here are the standard deductions for the 2025 and 2026 tax years:

8 tax deductions for homeowners

1. Mortgage interest deduction

The mortgage interest deduction — one of the main tax benefits for homeowners — allows you to deduct the interest you pay on a mortgage used to buy, build or improve your main home or second home.

You can deduct the interest paid up to $750,000 of mortgage debt if you’re an individual taxpayer or a married couple filing a joint tax return. For married couples filing separately, the limit is $375,000. If you bought your home before Dec. 16, 2017, the mortgage interest deduction limit is $1 million for single filers and married couples filing jointly and $500,000 for married couples filing separately.

2. Interest on home equity loans and HELOCs

The same deduction limits apply to the interest paid on home equity loans and home equity lines of credit (HELOCs). If you’re a single taxpayer and the combined amount of your first mortgage and HELOC is less than $750,000, for example, you’re allowed to deduct the full amount of interest paid on both loans — but only if they were both used to build, buy or make improvements to your main or second home.

Learn more about choosing between home equity loans and HELOCs.

3. Home improvements

You may be able to get a tax break for home improvements if the work is considered a capital improvement. The IRS defines a capital improvement as a home improvement project that:

This may include major renovations or additions, such as building a deck or garage. Eligible home improvement expenses are added to your cost basis, which can lower your taxable gain when you sell your house.

Medically necessary upgrades, such as installing ramps or handrails, may also be deductible.

4. Mortgage credit certificate

A mortgage credit certificate (MCC) is a tax credit issued by the government directly to a homeowner that allows you to reduce your tax bill by a specific percentage of your mortgage interest. You may be eligible for a mortgage credit certificate if you’re a first-time homebuyer, a military service member or are purchasing a home in an area targeted by the U.S. Department of Housing and Urban Affairs (HUD). Targeted areas may have been identified as needing development or revitalization.

5. Mortgage discount points deduction

Another one of the tax benefits of buying a home is the ability to deduct mortgage points you paid upfront when closing on your home purchase. One mortgage point, sometimes called a discount point, is equal to 1% of your loan amount.

Generally speaking, you’ll deduct points over the life of your loan rather than in the year you paid them. However, there is an exception to this rule if you meet a series of tests, as outlined by the IRS. The tests include:

6. SALT property tax deduction

There’s a deduction for state and local taxes (SALT), which includes property taxes. The total deductible amount is capped at $10,000 for single taxpayers and married couples filing taxes jointly. The deduction limit is $5,000 for married couples filing separately. This applies to tax years from 2018 through 2024, but for five years starting in 2025, the SALT deduction limit is boosted to $40,000. It’s important to know that, in some cases, if you receive a refund because of SALT deductions, some or all of that money may be taxable in the next tax year.

7. Residential clean energy credit

Through the end of 2025, there’s an eco-friendly tax break for homeowners, known as the Residential Clean Energy Credit. The incentive applies to energy-saving improvements made to a home, which might include solar panels and wind turbines, among other energy-efficient upgrades. Depending on the specific equipment, improvements made at a second home may qualify.

The energy credit is limited to 30% of the improvement cost, depending on what year the energy upgrades were made. It has been terminated for tax years after 2025.

8. Alternative fuel vehicle refueling property credit

If you install refueling infrastructure for an alternative fuel vehicle at your home, you may be eligible for a credit of up to $1,000 for each item of property by claiming the Alternative Fuel Vehicle Refueling Property Credit. Property eligible for the credit may include electric vehicle charging equipment. This tax credit is available through June 30, 2026 and has been terminated thereafter.

Tax deductions for special uses of your home

Home office deduction

If you work from home or have a home-based business, you may qualify for the home office deduction, which applies to both homeowners and renters. To qualify, a portion of your home (a bedroom-turned-office, for example) must be used exclusively and regularly for business purposes. You must also show that your home is the main location used to conduct your business.

There are two ways to claim the deduction:

Note: Remote employees typically don’t qualify for the deduction.

Rental expenses deduction

If you rent out all or part of your house, you may be able to deduct some of the expenses related to being a landlord, including:

Which expenses you can deduct varies depending on whether you’re renting out a home you do not make personal use of versus one you do use personally. The rules also vary depending on whether you use the house part time (such as with a vacation home) or full time, as in with a roommate situation.

The rental expenses deduction is also unique in that you can use it even if you don’t itemize on Schedule A. Instead, you’ll use Schedule E (Form 1040) to report the rental income and calculate your deduction.

Tax breaks for selling your home

Tax-free profits on your home sale

One of the tax benefits of owning a home doesn’t kick in until after you sell your home: tax-free profits.

If you sell your house at a profit, capital gains on a home sale are often tax-free up to $250,000 if you’re single, and up to $500,000 if you’re married filing jointly. You must have lived in and used the home as your primary residence for at least two of the five years before the sale date to qualify for this tax break.

Foreclosure or short sale (discharged debt) deduction

If you sell your home in a short sale or go through foreclosure, the house is sold and the proceeds are used to pay back the lender. However, if the amount you owed isn’t fully covered by those proceeds, the remaining debt is called a “deficiency,” and your lender could still expect you to pay that debt. If the lender forgives the deficiency, on the other hand, it’s considered part of your taxable income.

However, you may be able to deduct the outstanding mortgage debt you discharged from your taxes. The Consolidated Appropriations Act of 2020, which is in effect through 2025, allows you to exclude the canceled mortgage debt from your taxable income.

How to claim tax deductions

1. Wait for your tax forms

Each lender with whom you have a mortgage is required to send you a tax form called a Mortgage Interest Statement (Form 1098). When your 1098 arrives, review the amount of interest listed as paid. Box 1 will show how much interest you’ve paid, not including points, and box 6 will show the points you may be able to deduct.

2. Determine whether to itemize

Add up the total amount of eligible expenses across all of the deductions that apply to you. Then, compare that number to the standard deduction amount for which you qualify. If your total itemized deduction amount doesn’t exceed the standard deduction amount for your tax filing status, then it doesn’t make financial sense to itemize your deductions.

3. Claim your deductions

If you’ve decided to itemize, your final step is to sit down with your Schedule A (Form 1040) and claim all of the deductions you qualify for.