Whether you’re a first-time homebuyer or already own a home, it’s important to know the tax advantages of homeownership. You may be eligible for deductions, which lower your taxable income, or credits, which can reduce your tax bill. Take a closer look at how these benefits may apply to you.
What are the standard deduction amounts for 2024?
A standard deduction is a dollar amount that reduces your taxable income based on your filing status. The 2024 standard filing deductions are:
Single or married individuals filing separately: $14,600
Joint: $29,200
Head of household: $21,900
Read more: 14 ways to make the most of your tax refund.
Who should itemize deductions?
In recent years, only approximately 10% of taxpayers choose to itemize, likely because they will see a lower tax bill by claiming the standard deduction. You could potentially benefit from itemizing your deductions if the total is greater than your standard deduction, or if you:
Had large medical and/or dental expenses
Paid mortgage interest or real property taxes
Had losses from a disaster
Donated to charity
Qualify for other large, itemized deductions, such as impairment-related work expenses
Tax deductions for buying a house in 2024
Whichever deduction you choose, you’ll need to properly fill out tax forms or work with a tax advisor to determine what — and how much — you qualify for. If you do decide to itemize, here are home-related deductions to keep in mind.
Mortgage points deduction
When you purchase a home using a loan, you might pay lender fees called mortgage points that are often fully deductible in the year you purchased them and cost 1% of the mortgage amount. So, one point on a $400,000 mortgage would cost $4,000.
Mortgage interest deduction
Homeowners can deduct interest on the first $750,000 of their mortgage if they don’t take a standard deduction. Married taxpayers filing separately can deduct up to $375,000 each. Maintain records to show the amount you’ve paid in mortgage interest during the taxable year.
Home office deduction
Small business owners or freelancers can qualify for this deduction if they use their home office exclusively as a place of business. If the office is 300 square feet or smaller, you can calculate the deduction using the simplified option at a rate of $5 per square foot and a maximum $1,500 deduction.
Property, income and general sales tax deduction
State and local property, income and general sales taxes are typically eligible for deduction on federal income taxes. You can deduct $10,000 maximum ($5,000 if married filing separately).
Tax credits for homeowners
If you’re considering buying a home, or already own one, you may also qualify for one of the following:
Mortgage interest credit
To help lower-income, first-time homebuyers afford a home, state or local governments provide an annual credit certificate converting a portion of the mortgage interest into a non-refundable tax credit.
Learn more: A state-by-state guide to homebuyer programs.
Residential energy credit
This credit applies annually to homes updated after 2022 with energy-efficient windows, doors, and/or skylights or alternative energy equipment like solar panels. Check IRS guidance to determine how much you can claim.
First-time homebuyer tax credits
If this is your first time buying a home, you may be able to withdraw up to $10,000 from a traditional IRA to buy, build or rebuild a home without paying the 10% early withdrawal penalty — but you will have to pay taxes on these funds. You can also qualify for a tax credit if:
You haven’t owned a principal residence in the last three years
You are a single parent or displaced homemaker who has only shared ownership of a home with a spouse while married
You have only owned a home that isn’t permanently connected to a foundation
You have only owned property that didn’t fit state, local or model building codes and could not comply with those codes for less than the cost of a new residence
Tax advantages for a comfortable future
Tax deductions and credits can help make homeownership a reality while keeping your other finances on track.
