Homeowner Tax Deductions: Maximize Your Savings While Making Home Sweet Home Even Sweeter

Owning a home comes with a lot of perks—cozy spaces, backyard barbecues, and the joy of making a place truly yours. But did you know it has the potential to unlock some serious tax savings?

Whether you’ve made upgrades this year or just want to take full advantage of homeowner-friendly deductions, here’s how to make sure you’re getting the most from your investment when tax time rolls around. As you prepare to file, make sure to take note of the requirements and when these tax benefits expire.

Key takeaways

• Homeowners can potentially save on their taxes by writing off energy-efficient improvements, mortgage interest, and more.
• Due to the OBBBA, the mortgage interest deduction limits will remain the same.
• You can only claim an energy-efficient credit for home improvements made by December 31, 2025, due to changes made by the OBBBA.

Mortgage Interest Deduction: A major win for homeowners

If you’re making monthly mortgage payments, you’re likely eligible to deduct the interest you’ve paid on your mortgage—one of the biggest tax breaks for homeowners. You can deduct interest on up to $750,000 of mortgage debt (or $1 million if you purchased before December 16, 2017)¹. That’s real money staying in your pocket instead of going to Uncle Sam.

While these limits were expected to potentially increase after the Tax Cuts & Jobs Act expired, the One Big Beautiful Bill Act (OBBBA) made them permanent. The mortgage interest deduction is available for taxpayers who itemize their deductions.

Home improvements that pay off

Green home improvements can make your home more energy efficient and earn certain tax credits that could help save you money on your taxes. There are several energy-efficient additions available to taxpayers, from installing an electric car charger at your home to solar hot water heaters, solar panels, or qualified windows and doors, that could earn you some tax savings.

Projects like energy-efficient windows or a solar panel upgrade don’t just boost curb appeal—they may also qualify for tax credits. Energy-efficient home improvements can earn you a federal tax credit of up to 30% of the cost², making that eco-friendly choice even more rewarding.

If you had qualified energy-efficient items installed in your home, like qualified insulation, windows, doors, and some solar roofing tiles and shingles, you could claim the energy efficiency home improvement credit worth up to $1,200 per year².

Similarly, the Residential Clean Energy Credit rewards you for investing in renewable energy for your home, such as solar, wind, geothermal, fuel cells, or battery storage technology. The credit is worth up to 30% of energy-efficient equipment.

If the credit is more than your total tax bill for the entire year, the remainder of the credit can be carried forward to next year, but it won’t result in a bigger refund. It’s important to note that the installation of these systems must be in the US and in your main home or in a second home that is used as your residence. They must also have been fully completed by December 31, 2025.

A home energy audit is a written report used to identify potential cost-effective energy improvements for your home. If you had a home energy audit completed, you could claim a maximum tax credit of $150 (30% credit on audits that cost up to $500)².

Any home improvement expenses required for medical care as prescribed by a licensed medical professional could qualify for a tax deduction, too, as qualified medical expenses. This deduction is available to taxpayers who itemize their deductions and have total qualified medical expenses in excess of 7.5% of their AGI (adjusted gross income).

Recent tax policy updates that impact energy-efficient home improvements

Credits related to energy-efficient home improvements will be discontinued after 2025, as outlined by the OBBBA. In order to claim a credit for these improvements, you’ll need to ensure they’re installed by December 31, 2025. The deduction for medically necessary home improvements will remain.

Property tax deduction: Keep more of your hard-earned cash

Nobody loves paying property taxes, but at least they’re potentially deductible! Homeowners can deduct up to $40,000 in state and local property taxes³, which could provide some much-needed relief. Known as the SALT tax deduction, the combined total of your state income, sales, or property taxes can be deducted for up to a maximum of $40,000 for tax year 2025 as part of your itemized deductions.

Interest on home equity loans: Smart borrowing pays off

Thinking about tapping into your home’s equity for improvements? The interest on home equity loans or HELOCs (Home Equity Lines of Credit) is deductible—if the funds are used for home improvements.

If the HELOC secured by your main home or second home is used to buy, build, or substantially improve your home, the interest you pay on the borrowed funds may be deductible up to certain limitations. The borrowing limit of $750,000 for deductible mortgage interest includes any amounts owed on HELOCs.

Whether it’s a kitchen remodel or adding a dreamy backyard deck, your loan interest could help reduce your taxable income.

Homeownership is a big undertaking. But don’t worry, TurboTax has you covered. You can use our expert services to ask questions or receive assistance on your taxes.

Sources:
[1] https://www.irs.gov/publications/p936
[2] https://www.irs.gov/credits-deductions/energy-efficient-home-improvement-credit
[3] https://www.irs.gov/taxtopics/tc503