Common tax deductions for homeowners

As a homeowner, there are plenty of perks that you may benefit from including the ability to build wealth through equity while having a property of your own. However, one major advantage of home ownership is that it can offer a range of significant tax benefits. Up to certain limits, you’re able to receive tax deductions for mortgage interest, qualifying home improvements, property taxes, and other expenses. 

Did you know? The Treasury Department and Internal Revenue Service recently announced that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. With this said, if you are homeowner there are several deductions that you should be aware of. We will discuss several of these deductions below. As always, we recommend that you consult with your tax professional regarding these deductions.

Tax deductions for homeowners

  • #1. Mortgage interest:
  • If your mortgage or home equity line of credit (HELOC) is dated before December 15, 2017, you can deduct interest on up to $1 million of the mortgage (or $500,000 if you are married but filing separately). 
  • For mortgages and HELOCs dated after December 15, 2017, you can deduct interest on up to $750,000 of the mortgage (or $375,000 if you are married but filing separately).
  • Interest on home equity loans or lines of credit is deductible only if it was used to buy, build, or substantially improve the home that secures the loan.
  • #2. Property taxes: You can deduct up to $10,000 of state and local income taxes, including property taxes paid on your primary home, or any other real estate you own. If you’re married but filing separately, you can deduct up to $5,000.
  • #3. Real estate property taxes paid at settlement or closing: When closing on a property, the property taxes are divided between the buyer and seller based on the date of closing. Needless to say, these taxes may be tax deductible.
  • #4. Home improvement expenses: Generally, home improvement projects are not considered tax-deductible. However, there are two types of home improvement expenses that may be. Installing medically-necessary improvements such as a wheelchair ramp may be tax-deductible. In addition, improving your home’s energy efficiency may also qualify for a deduction.
  • #5. Moving expenses for active-duty military: Active-duty military personnel can deduct certain un-reimbursed moving expenses if the move was a permanent change of station (PCS), according to the IRS.
  • #6. Mortgage “points”: Points are charges paid by a borrower to obtain a home mortgage. Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. You can claim points as a tax deduction over the term of the mortgage.
  • #7. Home improvement loan points: Similar to above, points paid on a home improvement loan may be tax-deductible.
  • #8. Refinanced loan: If you refinance your mortgage loan and use some of the money to improve your principal residence, plus you meet the guidelines applicable to #6 above (mortgage points), you can deduct the portion of the points related to the improvement in the year you paid for the improvements. You can deduct the rest of the points over the life of the loan.
  • #9. Prepaid interest, private mortgage insurance, & various mortgage penalties: There are various other circumstances that may also qualify for tax deductions. These include prepaid interest, private mortgage insurance (PMI), & various prepayment or late penalties paid to your mortgage. Of course, you will want to consult with your tax professional on these items.


Home ownership is one of the best ways to accumulate wealth. According to the 2019 Survey of Consumer Finances (a triennial survey that collects detailed accounts of households’ finances) the median homeowner has 40 times the household wealth of a renter – $254,900 for the former compared to $6,270 for the latter. With this said, being knowledgeable of the various tax deductions that come with home ownership is an important part of this formula. As always, we advise that all of our clients consult with a tax professional when considering various tax deductions. As an added service, we can provide a list of reputable tax and legal professionals to our real estate clients.

Are you looking to buy or sell real estate in South Florida? We can help. Contact Live South Florida Realty, Inc. today!


REALTOR® with Live South Florida Realty, Inc.