Buying a new home is a big milestone—and a big financial decision. If you’re one of the many Americans who purchased a house in 2025, you’ll be happy to know the IRS offers some helpful tax benefits to ease the cost of homeownership. From deductions on mortgage interest to credits that reduce your tax bill, there are several ways to save if you know what to look for.
Understanding these tax-saving opportunities can make a real difference, especially for first-time buyers or those stretching their budgets to afford a property. Whether you’re already a homeowner or about to close on a house, make sure you’re aware of what you can and can’t deduct, what credits you may qualify for, and other programs that might help reduce your overall housing expenses.
What Tax Benefits Can New Homeowners Claim?
The IRS understands that buying a home comes with high upfront and ongoing costs. That’s why there are certain deductions and tax credits in place that may help lower your taxable income or reduce the amount you owe.
Here are the main home-related tax benefits you could qualify for:
- Mortgage Interest Deduction: If you’ve taken out a mortgage, you can typically deduct the interest portion of your mortgage payments—provided the loan meets IRS guidelines. This is one of the most common and valuable tax benefits for homeowners.
- State and Local Real Estate Taxes: These property taxes are deductible, but the total amount you can claim for state and local taxes (SALT) is capped at $10,000 per year under current federal rules.
- Mortgage Interest Credit (for Low-Income Buyers): If you’re a lower-income buyer and you received a Mortgage Credit Certificate (MCC) from a state or local government agency, you may be able to claim a Mortgage Interest Credit. This allows you to take a credit for a portion of the interest you pay on your mortgage every year.
- Housing Allowances for Ministers and Military: If you’re in the military or a minister receiving a housing allowance, you may be able to exclude that allowance from taxable income, which could lower your tax bill significantly.
What Home Expenses Are NOT Tax-Deductible?
While the IRS allows several deductions and credits, it also clearly defines what’s not allowed. Here’s what you cannot deduct from your federal taxes:
- Insurance premiums, including fire, title, and comprehensive insurance
- Principal payments toward your mortgage loan
- Wages paid to domestic help (maids, gardeners, etc.)
- Home depreciation
- Utility bills like water, gas, or electricity
- Closing and settlement costs
- Forfeited deposits or down payments
- Internet and Wi-Fi service
- HOA or condo association fees
- General home repairs or maintenance costs
Being aware of these non-deductible items can help you avoid mistakes when filing your tax return and focus only on the valid tax-saving areas.
Should You Itemize or Take the Standard Deduction?
This is a key decision for homeowners. If your total deductions (including mortgage interest and property taxes) are higher than the standard deduction, you may benefit from itemizing. Otherwise, it might be simpler and more beneficial to take the standard deduction.
For 2025, the standard deduction is:
- $14,600 for single filers
- $29,200 for married couples filing jointly
- $21,900 for heads of household
Homeowners often find that their itemized deductions are higher, especially in the first few years of ownership.
Make Your Home Purchase Count at Tax Time
Becoming a homeowner is an exciting journey, but it also comes with new responsibilities—like keeping track of potential tax breaks. Whether it’s deducting mortgage interest or claiming a credit, there are real opportunities to reduce your tax bill if you meet the eligibility criteria.
If you’ve just bought a home in 2025, don’t leave money on the table. Review your expenses, talk to a tax advisor if needed, and check the IRS website for the latest updates and eligibility rules. A few smart moves now can save you thousands in the long run.
