Homeownership should be both personally and financially rewarding. In addition to the mortgage interest deduction, there are several tax breaks available that can help you save money each year. Understanding these deductions ensures you’re making the most of your home investment.
Mortgage Interest Deduction: A Major Tax Saver
One of the most significant tax advantages for homeowners is the mortgage interest deduction. If you have a loan on your primary or secondary home, you can deduct the interest paid on mortgage debt up to $750,000 ($375,000 if married filing separately) for loans taken after December 15, 2017. For loans before that date, the limit is $1 million.
Keep in mind that the interest must be paid on a qualified home loan—not an investment property, unless structured properly.
Mortgage Credit Certificate (MCC)
If you received a Mortgage Credit Certificate (MCC) from your state or local government, don’t forget to include it in your tax return. To claim this credit, complete IRS Form 8396 and report the credit amount. If you’re also claiming the mortgage interest deduction, you’ll need to reduce it by the amount of your MCC.
Mortgage Insurance Premium Deduction (PMI)
For homeowners who made a down payment of less than 20%, private mortgage insurance (PMI) is typically required. The good news? PMI payments may be deductible if your adjusted gross income (AGI) is below $100,000 (phase-out applies up to $109,000).
This deduction is particularly beneficial for first-time homebuyers, as it can help lower taxable income.
Energy-Efficient Home Improvements
Making energy-efficient upgrades to your home can provide tax savings through a non-refundable tax credit. You may qualify for a 30% credit on the cost of eligible improvements, such as:
- Qualified energy efficiency improvements (e.g., energy-efficient windows, insulation)
- Residential energy property expenses (e.g., solar panels, heat pumps)
- Home energy audits
The amount you can claim depends on the type of improvement. For example:
- Up to $2,000 for heat pump systems, biomass stoves, and biomass boilers
- $150 credit for a home energy audit
- Up to $1,000 for installing an EV charging station, including bidirectional equipment that allows energy to flow back to the electric grid
To claim these credits, file IRS Form 8911.
Home Renovations for Medical Needs
Some home renovations may be tax-deductible if they qualify as medical expenses. Upgrades that improve accessibility for medical reasons, such as:
- Adding ramps
- Widening doorways
- Installing handrails
- Lowering cabinets
- Installing a lift or elevator
Even the maintenance and operation costs of these modifications may be deductible if they are medically necessary. For a detailed list of qualifying home improvements, refer to IRS Publication 502.
Home Office Deduction (For Self-Employed Homeowners)
If you work from home and are self-employed, you may qualify for the home office deduction. This can include a portion of your mortgage interest, property taxes, and utilities—provided the space is used exclusively for business purposes.
However, W-2 employees cannot claim this deduction unless they own a business.
How to Maximize Your Mortgage Tax Benefits
- Keep Good Records – Save mortgage statements, property tax bills, and receipts for home improvements.
- Consult a Tax Professional – Tax laws change frequently; a professional can help maximize your deductions.
- File the Right Forms – Mortgage interest and points are reported on IRS Form 1098, while property taxes are included in your tax return.
Homeownership isn’t just about having a place to call home—it also comes with valuable tax benefits that can save you money each year. Whether it’s deducting mortgage interest, property taxes, PMI, or home improvements, these tax breaks can help you keep more of your hard-earned money.
If you’re considering buying, refinancing, or upgrading your home, reach out to Core Bank to explore mortgage options that align with your financial goals. Your dream home might also be your best tax-saving strategy! Contact Core Bank to help you with the mortgage process!
*Core Bank does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction*
