As homeowners get ready to file their taxes this year, many are likely reflecting on what deductions they might qualify for and whether to choose itemizing or the standard deduction.
Each person’s tax situation can vary widely.
“Everyone’s situation is different,” says Kate Wood, a lending expert at NerdWallet. “For most homeowners, it’s tough to predict what things will look like since a lot hinges on your income and location.”
Being prepared can truly save taxpayers money.
The available deductions for homeowners this year largely mirror those from previous years, although there are some adjustments following a new Republican bill from last year.
The National Tax Agency will begin accepting tax returns on January 26th.
What deductions can homeowners claim?
The mortgage interest deduction stands out as a major tax break for homeowners.
However, fewer people are taking advantage of it since the 2017 Tax Cuts and Jobs Act nearly doubled the standard deduction, according to Wood. It’s still a viable option for those who itemize and have total eligible expenses—including mortgage interest, state and local taxes, and charitable contributions—that exceed the standard deduction.
The standard deduction for 2025 is set at $15,750 for single filers and $31,500 for married couples filing jointly.
Homeowners can deduct mortgage debt up to $750,000, or $375,000 if filing separately.
Other typical deductions include:
- Interest on home equity loans and home equity lines of credit (HELOCs). This can only be claimed if funds are used for eligible home improvements. “If you’re consolidating debts and take out a home equity loan, you can’t deduct the interest,” Wood notes.
- Home office expenses. Self-employed individuals or those working from home can deduct related expenses like rent, utilities, and property taxes. However, full-time employees receiving a W-2 who work from home aren’t eligible for this deduction.
- Medically necessary home improvements. Homeowners can deduct expenses for essential modifications, like installing medical equipment or building wheelchair ramps.
What’s new this year?
There are two significant changes for homeowners this year due to the recently passed “Big and Beautiful Bill.”
The first change is an increase in state and local tax (SALT) deductions. The new law raises the cap from $10,000 to $40,000, enabling taxpayers to deduct up to $40,000 in property and state/local income or sales taxes.
Single filers can now deduct up to $40,000, while married couples filing separately can deduct up to $20,000 each. This deduction phases out for individuals with an adjusted gross income above $500,000.
The benefits of this SALT cap increase will vary based on local taxes, type of property, and the amount paid in property taxes, Wood explains. “If you have a high-interest mortgage and live in a high-tax area, itemizing might be really beneficial,” she adds. “But if your mortgage is modest and you’re in a low-tax area, the standard deduction could suffice.”
The second major change is the elimination of the energy-focused home improvement tax credit, which will be phased out by the end of 2025 under the new bill. This credit was meant to help with the costs of clean energy upgrades, like solar panel installations and insulation improvements.
To qualify for this credit during this tax season, homeowners must finish energy equipment upgrades by 2025. “It’s not just about buying the products; the installation needs to be completed by December 31, 2025,” Wood clarifies.
