You should take the standard deduction if your total itemized deductions—including mortgage interest, property taxes (capped at $10,000), and charitable contributions—are less than the 2025 standard deduction ($15,750 single, $31,500 married filing jointly). While buying a home provides tax benefits, high standard deductions mean many homeowners still save more by taking the standard option rather than itemizing.
Buying a house might not even have any impact on your tax return at all. Unless you have enough itemized deductions to exceed your standard deduction, there will be no effect on your refund or tax due as a result of purchasing a home.
Certain taxpayers aren't entitled to the standard deduction:
For most homeowners, the biggest tax benefit of owning a home in California comes from the mortgage interest deduction. Your mortgage lender will provide you with an IRS Form 1098 at the end of each year that itemizes how much you paid in interest on your loan.
If your itemized deductions, including mortgage interest, property taxes, and other deductible expenses, add up to less than $15,750 as a single person or $31,500 as a married joint filer, you should claim the standard deduction.
“If you invest the money you would've used to pay off your mortgage into a retirement account, your return over the long term may exceed the savings of paying down your mortgage,” Poorman says. You're getting a decent tax deduction. It's deductible and the mortgage interest may make your effective tax rate even lower.
The main tax benefit of owning a house is that the imputed rental income homeowners receive is not taxed. Although that income is not taxed, homeowners still may deduct mortgage interest and property tax payments, as well as certain other expenses from their federal taxable income, if they itemize their deductions.
Generally, deductible closing costs are those for interest, certain mortgage points and deductible real estate taxes. Many other settlement fees and closing costs for buying the property become additions to your basis in the property and part of your depreciation deduction, including: Abstract fees.
The biggest tax mistakes people make include filing late, math errors, incorrect personal info (like Social Security numbers), forgetting deductions/credits (like EITC), misreporting income, not signing forms, and making errors with bank details for direct deposit, all leading to delays, penalties, or missed savings, with using tax software or professionals helping avoid these common pitfalls.
Standard deductions have filing limitations.
You won't be able to take a standard deduction in a few scenarios. For instance, if you are married but filing separately, you may not be able to take the standard deduction if your spouse itemizes. The same is true if you are claimed as a dependent on someone else's return.
The main tax breaks for buying a house are deducting mortgage interest (on up to $750k debt for newer loans) and property taxes, plus potential deductions for "points" (prepaid interest) and capital gains exclusion when selling, though there's no federal first-time homebuyer tax credit currently active; you must itemize deductions (not take the standard deduction) to benefit, with lender Form 1098 helping report interest paid.
The First-Time Homebuyer Tax Credit is equal to 10 percent of the home's purchase price, capped at a maximum dollar amount set by law. In 2025, the maximum credit is $15,000 for most buyers, or $7,500 if you are married and file taxes separately.
You can still deduct state, local, or foreign taxes you paid on non-business real estate, but only if you itemize. In other words, this deduction will only be beneficial if the total of your itemized deductions (including the real estate tax deduction) exceeds the standard deduction amount for your filing status.
6 Tax Deductions When Selling Your Home
Many business expenses are 100% deductible, including advertising, employee wages, rent, supplies, and certain business meals like company parties or meals for the public, while personal deductions like student loan interest or charitable donations (depending on the type) can also be fully deductible for individuals. The key is that the expense must be "ordinary and necessary" for your trade or business or meet specific IRS criteria, often differentiating from the 50% rule for client meals.
As a newly minted homeowner, you may be wondering if there's a tax deduction for buying a house. Unfortunately, most of the expenses you paid when buying your home are not deductible in the year of purchase. The only tax deductions on a home purchase you may qualify for is the prepaid mortgage interest (points).
The main tax breaks for buying a house are deducting mortgage interest (on up to $750k debt for newer loans) and property taxes, plus potential deductions for "points" (prepaid interest) and capital gains exclusion when selling, though there's no federal first-time homebuyer tax credit currently active; you must itemize deductions (not take the standard deduction) to benefit, with lender Form 1098 helping report interest paid.
E.g., if you're single, your standard deduction is $15,000. But if you buy a house and pay $30,000 in interest while earning say $150,000, then you'll have an additional $15,000 of taxes deducted. Since that $15K is in the 24% tax bracket you'll be saving an additional $3600 per year which is $300 per month.
To avoid the 22% tax bracket (or any higher bracket), focus on reducing your taxable income through strategies like maxing out 401(k)s and HSAs, deferring bonuses, tax-loss harvesting, smart charitable giving, and strategic asset location, understanding that higher rates only apply to income within that bracket, not your entire income.
The standard deduction is a flat amount that reduces your taxable income and potentially your tax bill. The amount, set by the IRS, could vary by tax year and filing status—generally, single, married filing jointly, married filing separately, or head of household.