Tax Implications of Homeownership

Owning a home comes with significant tax advantages — but the rules changed after the 2017 Tax Cuts and Jobs Act. Here's what still works and how to maximize your savings.

Mortgage interest deduction

The biggest homeowner tax break:

• ▸You can deduct interest on up to $750,000 of mortgage debt ($375,000 if married filing separately) on your primary and secondary residences.
• ▸It only applies if you itemize deductions vs. taking the standard deduction.
• ▸Standard deduction is $14,600 (single) or $29,200 (married) for 2024 — you need to exceed those thresholds for itemizing to pay off.
• ▸Your lender sends Form 1098 showing interest paid each year.

Property tax deduction (SALT)

State and local taxes (property + income/sales) are capped at $10,000 total per return. In high-tax states, this cap means many homeowners can't deduct all the property tax they pay — a real change from pre-2017 law.

Mortgage Credit Certificate (MCC)

If you're a first-time buyer who qualifies, an MCC turns a slice of your mortgage interest into a direct federal tax credit (typically 20–30% of interest, capped around $2,000/year). Unlike a deduction, a credit reduces your tax bill dollar-for-dollar. Many down payment assistance programs bundle an MCC.

Capital gains exclusion on sale

If you've lived in the home 2 of the last 5 years, you can exclude up to $250,000 (single) or $500,000 (married) of gain from taxes. Above that, long-term capital gains rates (0/15/20%) plus the 3.8% net investment income tax may apply.

Points paid at closing

Discount points paid to lower your rate are deductible — usually fully in the year paid on a purchase, amortized over the loan life on a refinance.

Always confirm with a CPA

Tax law shifts. Use these strategies as a framework, but confirm your specific situation with a tax professional — especially around the year of purchase or sale.