Tax Benefits of Owning a Home

Susan Kelly Updated on Jul 01, 2023

Are you considering leaping home ownership? Several financial benefits come with buying a house, such as tax deductions.

As it turns out, being a homeowner can do more than provide you and your family with shelter — by taking advantage of certain tax deductions, homeownership can effectively reduce how much money is owed in yearly taxes.

In this blog post, we'll explore some of the key financial advantages of owning a home so you can decide whether homeownership is right for you.

Mortgage Interest

Mortgage interest is one of the primary tax benefits of owning a home. When you take out a loan to purchase your house, you can deduct the interest paid from your taxable income each year.

These deductions can sometimes add up to thousands of dollars in yearly savings. This makes homeownership attractive for many people looking to reduce their annual tax burden.

Additionally, if your mortgage balance exceeds $750,000, any additional interest payments above this amount may be tax-deductible. Be sure to consult a certified accountant or financial planner to determine exactly how much of your mortgage interest payments are eligible for deduction.

By taking advantage of the potential tax savings associated with owning a home, you could save a bundle on your yearly tax bill.

Real Estate Taxes

Real estate taxes are a common form of tax deduction for homeowners. Depending on your state, these taxes fund public services like schools and roads. If you own a home, you may be eligible to deduct your real estate taxes from your taxable income each year.

This helps reduce the amount of money you owe in taxes. Additionally, if you're a homeowner 65 or older, many states also offer special exemptions and deductions for elderly taxpayers regarding real estate taxes.

Although the exact details vary from state to state, these can often result in even greater savings at tax time.

By taking advantage of this deduction, you can save money on your yearly taxes — meaning more savings for other things like home improvements or travel. So consider the potential tax benefits of homeownership when buying a house.

Discount Points

The benefits of owning a home may extend beyond shelter and security — homeownership can also offer tax savings that you won't find if you rent.

One way to make the most of your homeowner tax benefits is to take advantage of discount points when purchasing a new house or refinancing an existing one.

Discount points are a form of prepaid interest that allows buyers to reduce their mortgage loan's interest rate. Homeowners who purchase or refinance at least 1 point can benefit from lower monthly payments and reduced interest costs over the life of the loan.

Additionally, they can deduct all paid discount points they purchased to decrease their taxable income.

Private Mortgage Insurance

One of the key financial benefits of homeownership is the ability to deduct private mortgage insurance (PMI) from your taxes. PMI is a type of insurance paid for by homeowners on loans with less than 20% down payment and allows lenders to protect themselves against default.

Fortunately, you can deduct this cost when filing your federal income taxes, which helps reduce how much money you owe in taxes each year. Depending on your tax bracket or other deductions taken, this could mean significant savings for you and your family.

Be sure to speak with an accountant or tax specialist to learn more about taking advantage of this deduction during tax season.

Home Office Deduction

One of the major tax benefits associated with owning a home is the Home Office Deduction. This allows homeowners who use part of their home exclusively for business purposes to deduct certain expenses from their taxable income.

Expenses that are eligible for deductions include utilities, insurance, and repairs. Additionally, when you own your home, any depreciation due to wear and tear can also be written off. By taking advantage of this deduction, you can significantly reduce your overall tax bill each year.

Medically Necessary Home Improvements

One of the top tax advantages of owning a home is deducting certain medically-necessary home improvements. These improvements can be deducted from your taxes if you use them to reduce medical expenses that exceed 7.5% of your adjusted gross income (AGI).

Examples of these medically necessary home improvements include wheelchair ramps, widening doorways, and adding railings or support bars for safety.

To qualify for this deduction, keeping detailed records and receipts of all eligible improvements and related costs is important. Homeowners can save money on their yearly taxes by taking advantage of this tax benefit.

Home Sale

A home sale is one of the main tax benefits of becoming a homeowner. When you sell your home, any profit can be exempt from federal income tax if used as your main residence for two out of the last five years. This is a great way to get extra money in your pocket without worrying about paying taxes.

Moving Expenses

Regarding the financial benefits of owning a home, moving expenses is one major potential tax deduction. If you've recently purchased a house, you may be eligible for deductions on costs associated with the move—like travel and lodging costs, storage fees, packing materials, and professional movers.

As complex restrictions apply, you'll need to check with a qualified tax advisor if this applies to your situation. However, these deductions can add up quickly and offer significant yearly tax savings.

Understanding the tax implications of homeownership can help make your transition into homeownership smoother than ever.

Tax Credits

Regarding the financial benefits of homeownership, one of the most important considerations is tax credits. As a homeowner, you may be eligible for several types of deductions and credits that can significantly reduce your tax burden during tax season.

The biggest potential savings come from the mortgage interest deduction, which allows you to subtract a portion of your mortgage interest payments from your taxable income. Additionally, certain renovations or home improvements may sometimes qualify for additional credits.

Other possible deductions include property taxes paid on the home and points paid on the loan used to purchase the house. Homeowners who also use their residence as their primary place of business may take advantage of more substantial deductions depending on their situation.

By understanding and taking advantage of the tax credits available to homeowners, you can maximize your financial benefits from owning a home. With the right combination of deductions and credits, homeownership may save you much more than just on rent.


Does owning a home get you a bigger tax return?

Owning a home can help reduce your annual tax payments. The IRS allows homeowners to deduct certain expenses, such as mortgage interest and property taxes, from their taxable income.

As a result, depending on your overall financial situation and the deductions available, owning a home could get you a bigger tax refund each year.

Does having a mortgage help with taxes?

Yes, having a mortgage can help reduce your taxable income. The IRS allows homeowners to deduct certain expenses associated with their mortgages, such as mortgage interest payments and points paid on the loan.

Additionally, many states offer tax deductions for property taxes and other home-related costs.

What kind of home expenses are tax deductible?

The most common types of home expenses that are tax deductible include mortgage interest payments, property taxes, private mortgage insurance (PMI), and certain energy-saving improvements.

Depending on your financial situation and state of residence, you can deduct other home-related costs, such as points paid for a loan and closing costs.


Homeownership comes with many tax benefits. When buying a home, consider the mortgage interest, real estate taxes, discount points, private mortgage insurance, and home office deductions that may be allowed.

Use prudent judgment when deciding on medically necessary improvements, and know how those expenses will appear on your taxes. Finally, if you're ever in a situation that requires you to sell or move your home, be aware of the potential tax implications and the financial advantages like the home sale gain exclusion and moving expenses deduction.