Owning a home or property offers significant financial benefits, with one of the biggest advantages being potential tax breaks that can lower your taxable income. Tax laws may change, but homeowners with mortgage loans can still take advantage of several key tax breaks. Here are five deductions that could help you save money this tax season.

1. Mortgage Interest Deduction

The mortgage interest deduction is one of the most valuable tax breaks for homeowners. You can deduct the interest you pay on your mortgage each year, provided you meet these conditions:

• You must itemize your write-offs, not take the standard deduction.
• Your mortgage must be for a qualified home, such as a primary or secondary residence.
• Loan limits apply: You can write-off interest on up to $750,000 of mortgage debt ($375,000 if married filing separately).

With mortgage rates higher in recent years, many homeowners find their mortgage interest exceeds the standard deduction, making itemizing deductions a smart choice.

2. Property tax deduction

Homeowners can write-off state and local property taxes paid during the year, though the exemption is subject to the State and Local Tax (SALT) deduction cap. This cap limits total deductions for state and local income, sales, and property taxes to $10,000 ($5,000 for married filing separately). Despite this cap, writing off property taxes can still lead to substantial savings, especially for those in high-tax areas.

3. Home Equity Loan and HELOC interest deduction

If you’ve taken out a Home Equity Loan (HELOAN) or Home Equity Line of Credit (HELOC), you may be able to subtract the interest, but only if you used the funds to buy, build, or improve your home. Personal expenses like paying off debt or funding vacations are not deductible. This falls under the $750,000 mortgage debt limit ($375,000 for married filing separately), which includes both your primary mortgage and any home equity loans.

4. Discount Points Deduction

If you bought discount points when securing your mortgage, you may be eligible to write-off the cost. Discount points are prepaid interest that lowers your mortgage rate. Each point typically reduces your rate by 0.25% and costs 1% of the loan amount. You can deduct these points in full during the year you buy the home or spread the deduction over the life of the loan, depending on whether the points were for a new loan or refinance.

5. Home office deduction

Self-employed individuals who work from home may qualify for a home office reduction. To qualify, you must use a dedicated space exclusively for business purposes. There are two ways to calculate this deduction:

• Simplified method: Subtract $5 per square foot of your home office, up to 300 square feet.
• Regular method: Subtract a portion of actual expenses, such as utilities, mortgage interest, property taxes, and maintenance, based on the percentage of your home used for business.

Note that W-2 employees working remotely do not qualify for this deduction under current tax laws.

Are you maximizing your tax benefits?

These homeowner tax deductions can help you reduce your taxable income and maximize your savings. However, tax laws evolve, and every homeowner’s situation is unique. Always consult with a tax professional to ensure you’re taking full advantage of the reductions available to you.

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