For U.S. federal income taxes for tax year 2025, the homeownership costs most likely to qualify for an ordinary personal deduction are qualifying mortgage interest, qualifying mortgage points, and qualifying real-estate taxes. You generally claim them only if you itemize deductions on Schedule A. Mortgage principal, insurance, utilities, repairs, association fees and most closing charges do not become deductible merely because they appear in your monthly housing costs. Improvements usually affect your home’s tax basis instead of producing a deduction when you pay them.
This overview applies to personal federal returns. State rules, business-use allocations, rental activity and your individual debt history can change the result. Tax year 2025 generally means returns filed in 2026; check the current IRS forms and instructions for your facts.
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The basic test: itemize before you count home costs
For ordinary personal homeownership expenses, itemizing is the gateway. You total eligible deductions on Schedule A and compare that amount with the standard deduction available to you. You receive a tax benefit from a qualifying cost only when itemizing produces the better result under your circumstances. A charge being included in a mortgage payment, paid at closing or routed through an escrow account does not by itself make it deductible.
Publication 530, Tax Information for Homeowners, is the principal IRS guide for these rules. Publication 936 contains the mortgage-interest calculations, while Publication 587 addresses qualifying business use of a home. If part of the property is rented, Publication 527 supplies the separate rental rules.
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Property taxes: what counts and how the 2025 SALT limit works
What you may deduct
You may be able to deduct real-estate taxes that are imposed on you and paid during the tax year. Payment can be made directly to the taxing authority or through your mortgage escrow account. Amounts paid at settlement or closing can qualify when they are taxes attributable to your ownership and otherwise meet the IRS requirements.
A deductible real-estate tax generally must be assessed at a like rate on real property throughout the community and used for general governmental purposes. A charge for a special privilege or a particular service is not treated the same way as a qualifying general property tax. Keep the annual tax bill, closing statement and escrow records showing what was actually paid during the year.
The combined state and local tax ceiling
Property tax does not have its own separate unlimited deduction. It shares the state and local tax (SALT) limit with qualifying state and local income taxes or sales taxes. For tax year 2025, the general combined limit is $40,000, or $20,000 for married taxpayers filing separately. The limit is reduced when modified adjusted gross income exceeds $500,000, or $250,000 for married filing separately, but the reduction cannot push the limit below $10,000, or $5,000 for married filing separately.
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|---|---|
| General combined limit | $40,000 |
| Married filing separately limit | $20,000 |
| MAGI threshold for reduction | $500,000 |
| MAGI threshold for married filing separately | $250,000 |
| Lowest limit after the income-based reduction | $10,000 |
| Lowest limit for married filing separately | $5,000 |
These amounts are combined SALT limits, not property-tax-only allowances. For example, qualifying income tax and property tax payments must fit within the same applicable ceiling. The Schedule A instructions and later IRS guidance should be checked for updates or special circumstances.
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Mortgage interest: the debt’s purpose and security matter
Requirements for qualifying interest
Mortgage interest may be deductible when the debt is secured by your main home or second home and the borrowed money was used to buy, build or substantially improve the home that secures the loan. The name on the loan is not decisive. A home-equity loan or line of credit used for college expenses, investments, personal spending or another unrelated purpose generally fails the use-of-proceeds test, even if the lender calls it a home-equity product.
You must itemize to claim the personal deduction, and the allowable amount can be limited by the size, date and history of the debt. Multiple loans, refinancing, mixed uses and debt above the applicable ceiling require the worksheets and allocation rules in Publication 936.
Acquisition-debt limits for 2025
| When qualifying debt was taken out | General ceiling | Married filing separately |
|---|---|---|
| After December 15, 2017 | $750,000 | $375,000 |
| On or before December 15, 2017 | $1 million | $500,000 |
The $750,000 ceiling generally applies to qualifying acquisition debt incurred after December 15, 2017. Qualifying debt taken out on or before that date generally uses the $1 million ceiling. These are broad limits; grandfathered debt, refinancing and combinations of older and newer loans can require a more detailed calculation. Do not multiply the limit by the number of homes or assume every dollar of interest is allowed when balances exceed the applicable cap.
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How to determine the amount actually paid
Your Form 1098 from the lender is a starting point, not a substitute for reviewing the loan documents. Confirm that the debt secured a qualifying home, that proceeds were used for an eligible purpose and that any points or refinance amounts are treated correctly. If you paid interest at closing or to a lender that did not issue Form 1098, retain the settlement statement and payment records supporting the amount.
Points and interest paid at closing
When points can be deducted immediately
Points are generally prepaid interest. The default treatment is to deduct them ratably over the mortgage term. However, points on a loan secured by your main home may be deductible in full in the year paid when the IRS tests are met. Those tests address matters such as whether the points are a customary percentage of the principal, are shown on the settlement statement, are paid from your own funds rather than substituted for other charges, and are connected with buying or substantially improving the main home.
A loan used to substantially improve a main home can also qualify for immediate treatment when the applicable requirements are satisfied. A refinance usually does not permit an immediate deduction: points are generally spread over the new loan term. If the loan ends early or is refinanced by the same lender, special rules can accelerate some remaining points.
Seller-paid points
Seller-paid points can be treated as paid by the buyer for deduction purposes when the IRS conditions are met. They can also affect the home’s basis and the seller’s amount realized. Review the purchase contract and closing disclosure rather than assuming that every seller credit is deductible interest.
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Many charges grouped under “closing costs” are not interest or points. Appraisal, notary, title, credit-report, loan-assumption and mortgage-insurance charges generally are not deductible as mortgage interest. Depending on the item, a cost may instead be added to basis or may provide no current deduction and no basis addition. Publication 530’s statement that “You can’t deduct these costs” applies to the specified settlement and closing costs it identifies, not to every amount paid when purchasing a home.
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Costs that are usually not deductible for personal use
Owning a home does not create a general personal tax deduction. Under the ordinary homeowner rules, the following costs are generally not current Schedule A deductions:
- Mortgage principal payments.
- Homeowners insurance premiums.
- Utilities, including electricity, gas, water and similar services.
- Internet or Wi-Fi service.
- Homeowners association, condominium and co-op fees.
- Personal repairs and routine maintenance.
- Forfeited deposits, down payments or earnest money.
- Most personal settlement and closing fees that are neither qualifying interest nor points.
The deductible portion of a mortgage payment is not the payment itself. You separate qualifying interest, qualifying property tax and any properly treated points from principal and other charges.
Repairs versus improvements: deduction now or basis later
Personal repairs
A repair keeps the property in ordinary operating condition without materially adding value, extending useful life or adapting the home to a new use. Personal repair costs generally do not produce an itemized deduction. Examples can include fixing a leak, patching damage or replacing a broken component with a comparable one.
Capital improvements
An improvement materially adds value, considerably prolongs useful life or adapts the property to a new use. Publication 530 examples include a new roof, an added room or bathroom, new plumbing or wiring and driveway paving. A qualifying improvement generally increases your adjusted basis in the home instead of being deducted when paid.
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Basis matters when you later calculate gain or loss on a sale. Keep invoices, contracts, permits and proof of payment with your purchase and closing records. The cost of an improvement is not automatically the same as the entire contractor invoice if part of the work is a repair or a personal service.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Business or rental use changes the analysis
If a portion of your home is used for a qualifying business, otherwise personal expenses may be allocated under the home-office rules in Publication 587. Eligibility, exclusive and regular use, allocation methods and deduction limits all matter. A business-use share should not be treated as wholly personal or wholly deductible without performing that analysis.
Rental use is covered separately by Publication 527. Rental expenses, depreciation and interest may be allocated between personal and rental portions, with passive-activity and other limitations potentially applying. The personal homeowner rules in this article do not determine the treatment of the rental share.
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A practical recordkeeping and filing workflow
- Identify the tax year. For this article, collect amounts paid during 2025 for the return generally filed in 2026.
- Separate payment components. From mortgage statements and escrow records, distinguish principal, interest, real-estate tax and insurance. Do not use the total monthly payment as a deduction.
- Confirm the debt’s use and security. Verify that the loan is secured by the main or second home and trace proceeds used to buy, build or substantially improve that property.
- Check origination and refinancing dates. Determine whether the debt falls under the post-December 15, 2017 or earlier acquisition-debt limits, and apply Publication 936 rules for refinancing or multiple loans.
- Review points and closing documents. Decide whether points qualify for immediate treatment or must be amortized. Classify appraisal, title, credit-report, insurance and other charges separately.
- Collect property-tax proof. Keep tax bills, receipts and escrow statements showing the amount actually paid to the taxing authority during the year.
- Calculate the SALT total. Combine qualifying property, state income or sales taxes and apply the 2025 limit and any MAGI-based reduction.
- Classify projects. Mark each home expenditure as a repair, maintenance item or improvement, then preserve improvement records for basis.
- Allocate special use. If the home has business or rental use, apply the relevant separate publication before claiming a personal share.
- Compare itemized deductions with the standard deduction. Claim the home-related amounts on Schedule A only if itemizing is appropriate for your return.
Energy projects and tax credits are a separate question
A credit is not the same as an itemized deduction. Publication 530 states that residential clean-energy credits are unavailable for expenditures after December 31, 2025, and energy-efficient home-improvement credits are unavailable for property placed in service after that date. Because legislation and IRS guidance can change, verify the current rules for a specific project before relying on a credit. A qualifying improvement may still affect basis even when a credit or deduction is unavailable.
What to keep in your records
Retain the purchase contract, closing disclosure, mortgage statements, Form 1098, escrow histories, property-tax bills, canceled checks or electronic payment confirmations, invoices and receipts for improvements, permits and documents showing how loan proceeds were used. These records support both current deductions and the adjusted basis calculation when you sell. Keep them for as long as the records are relevant to your tax return and the property’s basis.
If your return involves a large mortgage, refinancing, multiple homes, business or rental use, or a mixture of old and new acquisition debt, use the current IRS worksheets or consult a qualified tax professional. The correct result depends on the facts, not simply on whether an expense appears in a mortgage statement or closing package.
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