Realtor.com shares, "A few years ago, my husband and I bought a townhome. The place is perfect for us, in a great area with nice neighbors, but it’s modestly sized and, admittedly, a little dated. It’s certainly not a luxury property—though seemingly well within the means of two 30-something professionals.
But with HOA dues, unexpected home repairs, car fixes, as well as the cost of two kids (and another on the way), I’m dedicated to clipping coupons and find myself biting my nails whenever I get an unexpected bill.
It’s no wonder I’m always stressed during tax season.
“How much do we owe this time?” I ask my husband every year, usually rubbing my temples as I try to fight off a money-induced migraine.
But recently, I realized that our biggest monthly expense, the mortgage, can actually benefit us come tax season. It’s changed the way I do taxes, the way I think about my home costs, and the way I’ll think about property investment in the future. Here’s what homeowners need to know.
The basics: Standard vs. itemized deductions
In April, many homeowners will be scrambling to find some way to score a break on taxes.
But first, it’s important to know the difference between standard and itemized deductions. Both can cut down on your income tax burden, but you can’t use both at the same time.
The standard deduction is essentially a flat reduction to adjusted gross income that anyone can claim. So, when you file your tax return, you can simply deduct a certain amount from your taxable income and be done.
For the 2025 season, the standard deduction is as follows:
- For single taxpayers and married individuals filing separately, the standard deduction is $15,000.
- For married couples filing jointly, the standard deduction is $30,000.
- For heads of households, the standard deduction is $22,500.
If the standard deduction seems high—it is! It nearly doubled as a result of the Tax Cuts and Jobs Act. It went up again in 2024 and will increase again for the 2025 season.
Meanwhile, itemized deductions can be a little more complex. These require taxpayers to claim various deductions to lower their adjusted gross income. It might sound like more work, but it could save some homeowners thousands of dollars.
Rocke Andrews, a mortgage broker at Lending Arizona in Tucson, AZ, explains that most people (90% for the tax year 2020) end up going with the standard deduction. However, if you own a home and especially if you live in high-tax states like New York, Connecticut, and California, itemized deductions could be a big money saver.
Popular deductions for homeowners
If you’re interested in trying the itemized deductions route, know that the IRS won’t allow homeowners to deduct just any home-related expense from their taxes. For example, you can’t deduct insurance, property depreciation, cost of utilities, HOA fees, gardeners, or housecleaning fees.
But, the IRS does offer several serious cost-saving deductions. Here are some of the more popular ones:
Mortgage interest
Barbara Schreihans, CEO and founder of Your Tax Coach, calls the home mortgage interest deduction “one of the most significant” deductions for homeowners.
Your mortgage interest is the amount of interest you paid on your home loan in the year. So if you have a mortgage on your home (as most do), you can deduct up to $750,000 in interest as a single filer or married couple filing jointly, or $375,000 for those who are married but filing separately.
Did you purchase discount points when you bought your house? The IRS considers points as prepaid interest, so these can also count toward your total mortgage interest, which means you can deduct the cost of the points.
Property taxes
Homeowners are subject to both state and local property taxes, but if you’re a married couple filing jointly, you can deduct up to $10,000 of these combined taxes, or $5,000 if you’re single or married filing separately.
Necessary home improvements and home office costs
It’s important to note that most home upgrades don’t count as “necessary” in the IRS’ eyes. Sprucing up your kitchen or bathroom (even if the space was very much due for a refresh) can’t be included until you sell the house.
However, if you’re adding a wheelchair ramp or widening doorways for accessibility, you might be able to deduct these expenses.
Likewise, you might be able to deduct the cost of maintaining a home office. However, to qualify, you’ll need to use the space regularly, and exclusively, for work. This can be especially beneficial for people who use a large room or garage space for work, as the size of the deduction is based on the percentage of your home dedicated to the workspace.
Unfortunately, as of 2018, home office deductions are only for those who are self-employed—and don’t apply to employees of companies who work remotely.
Electric vehicle charging station and clean energy improvements
There are also some nonmedical, non-work-related home improvements that you can deduct: energy efficiency upgrades.
If you installed an electric vehicle charging station this year, you’re entitled to a credit. Adding solar electricity, installing solar water heating, replacing windows, and fixing your roof could all earn you some tax credit. However, these eco-friendly tax breaks have a $1,200 annual limit.
Capital gains
For homeowners looking to sell, this one’s for you!
Your capital gain is the difference between the value of a home when you bought it (aka the “basis”) and the value when you sold it. So, if you sell your home, and if you used the home as your primary residence for at least two of the past five years, you can keep some profits without tax obligation.
How much does the average homeowner get back in taxes?
Andrews says it’s difficult to say how much the average homeowner will get back in taxes because between income, home costs, state taxes, every tax return is different.
Schreihans notes that the average mortgage interest deduction is around $1,200 to $3,000, though property tax deductions can also reduce taxable income “significantly.”
According to Bankrate, the average tax return in 2024 was $3,004—though that number includes homeowners and nonhomeowners alike. These averages have hovered around the same amount in the past decade, ranging from a low of $2,549 in 2020 to a high of $3,252 in 2022.
The Tax Cuts and Jobs Act, signed into law by President Donald Trump in 2017, made a lot of changes to homeowners’ deductions.
Schreihans explains: “The 2017 Tax Cuts and Jobs Act reduced the mortgage interest deduction cap from $1 million to $750,000. It also placed a $10,000 cap on state and local tax deductions, which significantly impacted homeowners in high-tax states by limiting the amount they could deduct.”
These changes can make it more difficult for homeowners to save money using itemized deductions, part of the reason many use the standard deduction.
Andrews explains: “Since the Trump tax reform went in place, the amount most get back doesn’t depend on individual expenses. Previously, the more you paid on mortgage interest and property tax, the greater the deduction. The only way it matters now is if all your deductions are greater than the standard deduction.”
When will I receive my tax refund?
If you’re expecting a tax refund this year, good news: It shouldn’t take too long to get your check in the mail. The earlier you file, the sooner you will receive your refund. (On the other hand, if you owe money, you have until April 15 to pay.)
The IRS states that a refund should be issued “in about six to eight weeks from the date IRS receives your return.”
However, the IRS states that if you file your return electronically, your refund “should be issued in less than three weeks”—and even faster still if you choose direct deposit.
Schreihans recommends taxpayers file early, choose e-filing, opt for direct deposit, and ensure their return is free of errors to avoid delays from the IRS.
If you’re expecting a refund but haven’t yet gotten your check, you can use the IRS’ handy Where’s My Refund tool. You’ll need to input your Social Security number or Individual Taxpayer Identification Number, your filing status, and the dollar amount of your refund.
Bottom line: Will you get a bigger tax refund if you own a home?
Generally, buying or owning a home doesn’t automatically mean you’ll get a bigger tax refund. However, if you choose to use itemized deductions, your home may help with lowering your tax base, which can result in a higher refund or a lower tax burden.
It’s important to consider your home costs, the size of your mortgage, and even your location.
“Some states offer additional property tax relief or homestead exemptions,” explains Schreihans.
In the end, the Tax Cuts and Jobs Act made it more difficult for homeowners to save money using itemized deductions, but it’s still possible. You may wish to hire a certified tax preparer to maximize your allowable tax deductions."
Source: Realtor.com
Written by: Jillian Pretzel
Published: February 3, 2025
Posted by Grossman & Jones Group on
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