Mortgage Interest Deduction | How Owning a Home Impacts Your Taxes
- By Jim Blackburn
- on
- Cash-Out Refinance, Financial Planning, First-Time Home Buyer, Sell A House, Tax Strategies
1. Mortgage Interest and Property Tax Deductions Can Lower Your Taxable Income
One of the biggest tax benefits of owning a home is the ability to deduct mortgage interest and property taxes from your taxable income.
Mortgage interest deduction: You can deduct the interest you pay on your mortgage loan, which can add up to significant savings, especially in the early years of your mortgage when a larger portion of your payment goes toward interest.
Property tax deduction: You can also deduct the amount you pay in property taxes on your home. This reduces your taxable income, potentially lowering your overall tax liability.
These deductions can make homeownership more affordable and help you save money each year.
Understanding how much mortgage interest you’ll pay is key to maximizing your tax deduction. Calculate your Conventional Purchase Loan Payment now to see your annual interest costs and estimate your potential mortgage interest deduction.
2. Capital Gains Exclusion When Selling Your Home
When you sell your home, you may be eligible for a capital gains exclusion, meaning you won’t have to pay taxes on the profit from the sale of your home up to a certain amount.
If you meet certain conditions, you can exclude:
$500,000 of profit if you’re married and filing jointly
$250,000 of profit if you’re a single filer
To qualify for this exclusion, you must have lived in the home for at least two of the five years before selling it. This can be a huge tax break, especially if your home has appreciated in value over time.
Planning to sell and want to maximize your capital gains exclusion? Calculate your Bridge Loan, Capital Gains Tax Exclusion & Payment Recast now to understand how timing your sale impacts your taxes and how to smoothly transition to your next home.
3. Deductions for Energy-Efficient Improvements and Home-Related Expenses
Homeowners may also be eligible for tax credits and deductions for energy-efficient improvements made to their home.
Common energy-efficient improvements include:
- Solar panels
- Energy-efficient windows and doors
- Insulation upgrades
These improvements not only help reduce your energy bills but can also qualify you for tax credits that can reduce your tax liability. Additionally, certain home-related expenses, such as mortgage insurance premiums or points paid to secure your loan, may be deductible, providing you with even more savings.
If you’re planning major home improvements, accessing your equity can help fund energy-efficient upgrades. Calculate your Conventional Cashout Refinance Loan Payment now to see how you can tap equity for improvements that both increase your home’s value and provide tax benefits.
Need ongoing access to funds for multiple home improvement projects? Calculate your Heloc Loan Payment now to explore a flexible line of credit for tax-deductible home improvements over time.
Ready to Maximize Your Homeownership Tax Benefits? Let's Make Sure You're Covered
At Stairway Mortgage, we’re here to help you navigate the home-buying process—so you can make the most of the tax benefits of owning a home.
📘 Download our homebuyer guides about tax benefits and deductions.
📊 Check Current Rates to see today’s mortgage options.
🧮 Explore tax-smart strategies with our Bridge Loan Calculator.
🏠 Learn more on our Sell a House page about capital gains strategies.
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