Homeownership & Tax Season: What You Should Know

What Homeowners Should Know During Tax Season

As tax season approaches, many homeowners start to wonder how owning a home may affect their tax return. While every situation is unique, there are a few common items that often come up for homeowners when preparing taxes. Below is a helpful overview to keep in mind as you gather your documents.

Please note: this information is for general educational purposes only and should not be considered tax, legal, or accounting advice. Always consult a qualified tax professional regarding your specific situation.

Mortgage Interest Deduction

If you choose to itemize deductions on your tax return, you may be able to deduct the interest paid on your mortgage for your primary or secondary residence.

For many homeowners, mortgage interest is generally deductible on up to $750,000 of qualified mortgage debt (or $375,000 if married and filing separately). This can be one of the most significant tax benefits associated with homeownership.

Form 1098: Mortgage Interest Statement

Most homeowners will receive Form 1098 from their mortgage servicer if they paid $600 or more in mortgage interest during the year.

This form summarizes the amount of interest paid on your loan and may also include certain prepaid interest or points. It is an important document your tax professional will use when determining any potential deductions.

Discount Points

If you paid discount points to lower your mortgage interest rate when purchasing your home, those points may also be deductible if you itemize.

In some cases—especially when purchasing a primary residence—points may be fully deductible in the year they were paid if IRS requirements are met. Otherwise, they may need to be deducted gradually over the life of the loan.

Property Tax Deduction (SALT)

Homeowners who itemize may also deduct state and local taxes, including property taxes. These deductions fall under the SALT (State and Local Tax) deduction cap.

For 2025, the combined deduction limit is generally up to $40,000 (or $20,000 if married filing separately), although certain income-based limitations may apply. Keep in mind that only property taxes actually paid during the tax year may qualify.

If your property taxes are paid through an escrow account, they may also appear on your Form 1098.

Your Closing Disclosure

Your Closing Disclosure from when you purchased or refinanced your home contains important details about your loan, including your interest rate, closing costs, and other financial information.

This document can be helpful when reviewing tax-related details with your accountant. If you need a copy and can’t locate yours, your lender should be able to provide one.

Final Thoughts

Homeownership can offer meaningful financial advantages, and understanding the potential tax implications is part of making the most of your investment. As you prepare your return, make sure you have the right documents on hand and consult a trusted tax professional to guide you through the details.

If you ever have questions about buying, selling, or investing in real estate, I’m always happy to be a resource.