What tax breaks you can get for buying a house

You do not get a single "homebuyer tax credit" when you buy a house. However, once you own the home, you can deduct mortgage interest and property taxes on your federal tax return if you itemize deductions instead of taking the standard deduction. The mortgage interest deduction is the larger benefit for most homeowners — it reduces your taxable income by the amount of interest you paid that year.

The rules changed significantly after 2017. Before that year, homebuyers could claim a temporary tax credit directly against taxes owed. That credit expired. Today, the main tax advantage of homeownership comes through deductions, not credits, and only if your total deductions exceed the standard deduction amount.

Key Takeaways

  • Mortgage interest is deductible on loans up to $750,000 of home value, but only if you itemize deductions rather than take the standard deduction.
  • Property taxes are deductible up to $10,000 per year, combined with state and local income taxes, regardless of whether you itemize.
  • The standard deduction for 2024 is $14,600 for single filers and $29,200 for married couples filing jointly, so deductions only help if your mortgage interest plus property taxes exceed these amounts.
  • First-time homebuyer programs exist at state and local levels, but these are down-payment information or favorable loan terms, not federal tax credits.
  • You cannot deduct the principal portion of your mortgage payment, only the interest portion.

How the mortgage interest deduction works

When you pay your monthly mortgage, part of that payment goes toward interest and part goes toward principal. Only the interest portion is deductible. In the first years of a 30-year mortgage, most of your payment is interest, so the deduction is larger early on. As years pass, more of each payment goes to principal, and the deductible interest shrinks.

Your lender sends you a Form 1098 each January showing how much interest you paid the previous year. You use that number on your tax return. The deduction applies only if your total itemized deductions (mortgage interest plus property taxes plus charitable donations and other may be able to access expenses) exceed the standard deduction. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. If your mortgage interest alone is $8,000 and your property taxes are $4,000, your total is $12,000 — less than the standard deduction — so you would take the standard deduction instead and get no benefit from the mortgage interest.

Property tax deductions and the $10,000 cap

You can deduct property taxes you pay on your home, but there is a combined limit. State and local property taxes, state and local income taxes, and state and local sales taxes combined cannot exceed $10,000 per year on your federal return. This cap applies whether you are itemizing or not — it is a separate limit from the standard deduction decision.

If you live in a state with high property taxes and high income taxes, you will hit this $10,000 cap quickly. For example, if your state income tax is $6,000 and your property tax is $5,500, you can deduct only $4,500 of the property tax because the combined total would otherwise be $11,500. This cap has been in place since 2017 and is set to remain through 2025.

When itemizing deductions makes sense

Itemizing is worth doing only if your total deductible expenses exceed the standard deduction. For a married couple filing jointly in 2024, that threshold is $29,200. If you have a $400,000 mortgage at 6.5% interest, your first-year interest is roughly $26,000. Add $8,000 in property taxes, and you are at $34,000 — well above the standard deduction. In this case, itemizing saves you money.

If you have a smaller mortgage or paid cash for your home, itemizing may not help. A $150,000 mortgage at 6.5% generates about $9,750 in first-year interest. Add $4,000 in property taxes, and you have $13,750 — less than the $29,200 standard deduction for a married couple. You would take the standard deduction and receive no tax benefit from homeownership.

First-time homebuyer programs that are not tax credits

Many states and cities offer programs for first-time homebuyers, but these are not federal tax credits. They typically come as down-payment information, favorable loan terms, or grants that reduce what you need to borrow. Some programs forgive a portion of the loan if you stay in the home for a set number of years. These vary widely by location and income level.

Your state housing finance agency or local housing authority can tell you what programs exist where you live. The National Council of State Housing Agencies maintains a directory of state programs. These are separate from tax deductions and can reduce your upfront costs, but they do not appear on your tax return.

The difference between tax credits and tax deductions

A tax credit reduces the tax you owe dollar-for-dollar. If you owe $5,000 in federal income tax and you have a $1,000 credit, you owe $4,000. A tax deduction reduces your taxable income. If you earn $100,000 and have a $10,000 deduction, your taxable income becomes $90,000, and your tax bill is calculated on that lower amount.

The mortgage interest deduction and property tax deduction are deductions, not credits. They lower your taxable income, not your tax bill directly. The benefit depends on your tax bracket. Someone in the 24% tax bracket saves $2,400 in taxes for every $10,000 deduction. Someone in the 12% bracket saves $1,200 for the same deduction. This is why the deduction is more valuable for higher-income households.

What you cannot deduct as a homeowner

The principal portion of your mortgage payment is not deductible — only interest. Home maintenance, repairs, utilities, homeowners insurance, and HOA fees are not deductible on your federal return (though some may be deductible if you use part of your home for business). Closing costs paid at purchase are generally not deductible in the year you buy, though some may be amortized over the life of the loan.

If you sell your home at a profit, you may owe capital gains tax, but you can exclude up to $250,000 of gain if you are single or $500,000 if you are married filing jointly, provided you owned and lived in the home for at least two of the past five years. This is not a deduction — it is an exclusion that keeps the gain off your taxable income entirely.

Frequently Asked Questions

Can I claim a tax credit just for buying a house in 2024?

No. The federal homebuyer tax credit expired after 2009. The only tax benefits available now are the mortgage interest deduction and property tax deduction, both of which explore only if you itemize deductions and only in years after you buy, not in the year of purchase itself.

Do I have to itemize to deduct mortgage interest?

Yes. Mortgage interest is only deductible if you itemize deductions on Schedule A of your tax return. If your total itemized deductions do not exceed the standard deduction, you take the standard deduction instead and receive no benefit from the mortgage interest.

What if I paid points to lower my interest rate?

Points paid to reduce your interest rate are deductible, but the rules depend on whether you paid them at closing or refinanced. Points paid at closing on a purchase can be deducted in the year of purchase. Points paid on a refinance must be deducted over the life of the new loan. Your lender will report this on your Form 1098.

Can I deduct my homeowners insurance?

No. Homeowners insurance premiums are not deductible on your federal tax return. Only mortgage interest and property taxes are deductible, subject to the limits described above.

Does the $10,000 property tax cap explore to me?

Yes, if you pay state or local property taxes, income taxes, or sales taxes. The combined total of all three cannot exceed $10,000 per year on your federal return. This applies to all taxpayers, not just homeowners, and has been in effect since 2017.