Filing Taxes After You Buy a House

Buying a home is an exciting milestone. But when tax season rolls around, many homeowners might wonder: What does this mean for my taxes?  

Homeownership comes with many tax benefits, including deductions and credits for things like mortgage interest and property taxes. These deductions can potentially help lower your overall tax liability.

Tax laws and write-off amounts change frequently, so it’s important to stay up-to-date on the latest deduction rules. For instance, as of July 4, 2025, the One Big Beautiful Bill Act (OBBBA) officially extended most of the policies that were established with the Tax Cuts & Jobs Act (TCJA), which had shifted some of the rules for homeowners.

In this guide, we’ll break down what you need to know about homeownership and taxes, whether it’s your first time filing taxes after buying a house or you’re a veteran at it. We’ll cover the key deductions, recent SALT deduction changes, credits, and other homeownership tax advantages covered in IRS Publication 530 and elsewhere.

Key takeaways

• Homeownership offers valuable tax benefits, including deductions for mortgage interest and property taxes that can lower your taxable income.
• The SALT deduction cap, previously set at $10,000 under the TCJA, will increase to $40,000 starting in 2025 due to the OBBBA, with 1% annual increases through 2029.
• Home improvements, including energy-efficient upgrades, are no longer tax-deductible after 2025. 
• Additional tax benefits for homeowners include property tax write-offs, home office deductions, and special provisions like penalty-free IRA withdrawals for first-time homebuyers.

Types of tax deductions related to homeownership

As a homeowner, you can take advantage of several tax deductions to significantly lower your taxable income. Let’s explore the most common deductions and credits available to ensure you can maximize your tax savings.

Mortgage interest deduction

The mortgage interest deduction allows homeowners to deduct interest paid on their mortgages as an itemized deduction. This can reduce your overall tax liability, especially in the early years of your mortgage when a significant percentage of your payments go toward interest.

This deduction applies to interest on loans used to purchase, build, or substantially improve your primary residence or, in some cases, a second home.

Maximum deduction amounts:  

• For mortgages taken out after December 15, 2017, you can deduct interest on loan balances up to $750,000 for married couples filing jointly ($375,000 if married filing separately).
• For mortgages taken out before December 16, 2017, the loan balance limit is $1 million for married couples filing jointly ($500,000 if married filing separately).  

The mortgage interest deduction is part of your itemized deduction calculation reported on Schedule A of your tax returns.

If your itemized deductions are higher than your standard deduction, you will be able to deduct your mortgage interest on your tax return. But how do you know which one to use? Don’t worry. When you file with TurboTax, we’ll guide you through the process step by step.

Private mortgage insurance (PMI) deduction

Private mortgage insurance (PMI) is a policy that protects lenders if a borrower defaults on a loan. PMI is typically required if your down payment is less than 20% of your home’s purchase price.

The deduction for PMI premiums expired after the 2021 tax year. However, under the OBBBA, the deduction was made permanent starting in the 2026 tax year. The deduction begins to phase out at adjusted gross incomes over $100,000 if married filing jointly ($50,000 married filing separately) and is completely phased out for most filers with incomes over $110,000 ($60,000 if married filing separately).

Real estate tax deduction

The real estate tax deduction allows you to deduct property taxes paid on your primary residence, a vacation home, or other real estate.

The TCJA had previously limited the deduction for state and local taxes (SALT) to $10,000 per year, which was set to expire in 2025. However, under the OBBBA, that cap increases to $40,000 per year starting in the 2025 tax year. The cap will then rise to $40,400 in 2026, with an additional 1% increase each year through 2029.

The deduction begins to phase out for individuals with incomes above $500,000, or $250,000 for married taxpayers filing separately.

Note: Many use the terms “real estate tax” and “property tax” interchangeably, but there are essential differences: 

• Real estate taxes typically refer to taxes levied on real property, like land and buildings.
• Property taxes may also include taxes on personal property like vehicles or boats.

The majority of taxes paid on both real estate and personal property are deductible on your Schedule A as part of your SALT deduction. Be sure to keep detailed records of property tax payments to ensure you file them accurately on your tax return.

Mortgage points

Mortgage points (also called discount points) are fees paid upfront to your lender at closing in exchange for a lower mortgage interest rate. Each point typically costs 1% of your loan amount and can reduce your monthly mortgage payments over time. 

A major benefit of mortgage points is that you can often deduct them on your tax return, provided you use the loan to buy or build your primary residence and meet other IRS requirements. 

To qualify for the mortgage points deduction:

• The mortgage must be used to buy or build your primary residence. 
• The loan must be secured by your home. 
• The points must be clearly itemized in your loan documents.
• You cannot have borrowed the funds from the lender to pay the points.

Home improvements and energy credits

Home improvements provide homeowners with two different types of tax benefits: 

• Residential Energy Tax Credits: Certain energy upgrades, such as installing new windows, heat pumps,  or solar equipment, previously qualified you for one of two home energy tax credits. However, these tax credits are currently scheduled to expire after the 2025 tax year due to the OBBBA policy updates. 
• Basis Adjustment: Costs of capital improvements, such as a new roof or adding a new room,  are added to the tax basis of your home. This benefit allows you to reduce any future profit (a.k.a. capital gain) when you sell the home. This reduction could help you stay under the capital gains exclusion limit of $500,000 for married filing jointly ($250,000 for married filing separately). Unlike the energy tax credits, this benefit is permanent and not affected by the OBBBA.

Itemized deductions vs. standard deduction: Which is best for homeowners?

When filing your taxes, you have a choice between taking the standard deduction or itemizing your deductions. The right choice for you depends on which one reduces your tax liability the most.

The standard deduction is a fixed dollar amount that reduces your taxable income without requiring you to list (itemize) your expenses. The amount is based on your filing status for the year.

Previously, the TCJA increased the standard deduction, making it the better option for many taxpayers. While these increases were originally set to expire after tax year 2025, the OBBBA permanently increased the deduction amounts and even provided for a slight increase for 2025. The  standard deduction amounts for the 2025 tax year are:

• Married filing jointly: $31,500
• Single or married filing separately: $15,750 
• Head of household; $23,625 

If you’re a homeowner, itemizing your deductions can bring you a greater tax benefit if you have significant mortgage interest and property tax payments. Itemizing allows you to account for specific expenses like medical costs and state and local income taxes, all of which can further reduce your taxable income.  

• Example: If you’re single with $12,000 in mortgage interest and $9,000 in property taxes, your total itemized deductions would be $21,000—significantly more than the standard deduction of $15,750. 

If your total itemized deductions exceed the standard deduction, itemizing can lower your taxable income. If you’re unsure which option is best, don’t worry. TurboTax will guide you through the process, automatically calculating whether itemizing or taking the standard deduction will save you more.

Other considerations for homebuyers

In addition to the more common tax deduction possibilities listed above, there are other lesser-known tax advantages for homebuyers.  

Here are some of the main ones to consider:

• Home office expenses: If you’re self-employed and use part of your home exclusively for business, you may be able to deduct certain expenses. These expenses can include a portion of your mortgage interest, utilities, insurance, and repairs that directly relate to the percentage of your home used for business. 
• Interest on home equity loans or home equity lines of credit (HELOCs): Interest paid on home equity loans or lines of credit may be deductible if the funds are used to buy, build, or significantly improve the home. The amount of HELOC debt is counted toward the mortgage loan balance limit of $750,000 ($1 million for loans taken out before December 16, 2017). 
• IRA withdrawal for a home purchase: First-time homebuyers can withdraw up to $10,000 from an IRA without penalty to purchase a home. This exception applies to traditional IRAs and Roth IRAs. 
• State and local tax benefits: Some states offer tax credits or deductions for first-time homebuyers. These vary by location, so check your state’s programs for potential savings.

Forms you’ll need when filing your taxes after buying a home

After purchasing a home, you will see several necessary tax forms to ensure accurate reporting and maximize deductions. These may include:  

• Form 1040: This is the main individual income tax return where you report your income and deductions. If you itemize deductions, the total amount from Schedule A will be entered here. 
• Form 1098: Your mortgage lender will send you this form if you paid $600 or more in mortgage interest during the tax year. It reports mortgage interest, points paid at closing, and property taxes (if paid through escrow). 
• Form 8829: If you use part of your home exclusively and regularly for business, you’ll use this form to calculate the home office deduction. 
• Schedule A: If you itemize your deductions, use this form to report mortgage interest, property taxes, and other eligible deductions. 

Depending on your situation, additional forms may be required, especially if you took an early IRA withdrawal for a home purchase (Form 5329) or claimed energy efficiency tax credits (Form 5695).  

Not sure which forms apply to your situation? TurboTax will ask the right questions to help ensure everything is reported correctly.