When buying a house, you can typically deduct mortgage interest, property taxes (up to $10,000 combined with state/local taxes), and prepaid mortgage interest (points) on your tax return. These deductions require itemizing, rather than taking the standard deduction, and apply to primary residences or sometimes second homes.
A special property tax deduction in California is available for homeowners on their primary residence. Homeowners need to file a form with the tax assessor in their county to receive a $7,000 reduction in taxable value for the home.
Expenses from the use of a company or business vehicle, such as tolls, maintenance fees, licenses, and insurance, are usually 100% deductible; however, it's vital to keep detailed records of how the business is using the car, including tracking the mileage.
New homeowners should keep paperwork such as:
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.
Tax Credit in General
For first time homebuyers, there is a refundable credit equal to 10 percent of the purchase price up to a maximum of $8,000 ($4,000 if married filing separately).
Capital Improvements
The IRS allows taxpayers to deduct up to $3,000 of realized investment losses ($1,500 if married filing separately) against ordinary income each year. This deduction applies only to losses in taxable investment accounts and must be realized by December 31st to count for that tax year.
Allowable expenses include your basic office costs such as stationery and the bills you pay on your business phone. Travel costs and staff salaries are also included, as is the cost of a uniform or other appropriate clothing (for example, if you work in a skilled or manual trade).
Five Most Overlooked Tax Deductions
The $20,000 limit under the measures applies on a per asset basis, so small businesses can instantly write off multiple assets. Assets valued at $20,000 or more can continue to be placed into the small business pool and depreciated at 15% in the first income year and 30% each income year after that.
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.
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.
New flooring is typically considered a capital improvement, which has tax benefits when you go to sell. Capital improvements include additions to a property that raise its value, energy-saving features, or adaptations for future use.
A tax deduction subtracts a certain amount from your taxable income. First-time homebuyers may be eligible for certain tax breaks, including mortgage interest deductions, origination fee deductions and property tax deductions.
Taxpayers will claim the credit on new IRS Form 5405, First-Time Homebuyer Credit. Only the purchase of a main home located in the United States qualifies. Vacation homes and rental property are not eligible. For a home that you construct, the purchase date is the first date you occupy the home.