7 Potential Tax Benefits for Homeowners

There’s no sugar coating it – homeownership is expensive. Downpayment, insurance, mortgage, PMI and repairs, taxes – you name it; it adds up. But we aren’t here to squash dreams of owning a home! We’re here to help you figure out how you can make it work within your budget AND to let you know that there are ways to make it more affordable. Did you know there are tax benefits for homeowners? Depending on where you live, if you’re a first-time home buyer or work in the military or ministry, there are tax write-offs, credits and allowances for you! Let’s take a dive into each of those benefits:

Mortgage Interest Credit

This tax benefit is to help people lower income afford to own a home. If you qualify, you’ll be issued a Mortgage Credit Certificate by your state or local government. Then you would file the IRS 8396 form. If approved, you can claim the credit each year for part of the mortgage interest paid.

Energy-Efficient Home Improvement Credit 

Depending on when you made energy-efficient improvements to your home depends on the amount of credit you’ll receive, but the beauty is, this is an annual credit. There is, however, a new rule starting in 2025 to pay close attention to:

“…[B]eginning in 2025, for each item of qualifying property placed in service, no credit will be allowed unless the item was produced by a qualified manufacturer and the taxpayer reports the PIN for the item on their tax return.”

Home Office Deduction

If you’re running a business out of your home, there are tax deductions available to you. These deductions may include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent. For a full list of deductions and what qualifies as a home office, take a look here or speak with your accountant.

Medical Home Improvement Deduction

There are tax deductions available if you’ve had to make home improvements for the purpose of medical reasons for yourself, spouse or dependent. This list is not exhaustive, and it’s not guaranteed, but speaking with your tax accountant if this is something you’ve done in your home could be beneficial.

First-Time Home Buyer Benefits

Investopedia tells us “First-time homebuyers often qualify for special benefits, such as lower minimum down payments, special grants, and assistance with paying closing costs, that are sponsored by state and federal governments. Many lenders offer first-time homebuyers incentives and special loans.” So the best route to go here is to speak with your lender as this is specific to each state.

Ministry Housing Allowance

Religious workers receive a housing allowance that is a portion of their salary and is excluded from federal income tax. This can be used for rent, mortgage payments, utilities, maintenance and even home furnishings.

Military Housing Allowance

Active-duty military members receive Basic Allowance for Housing (BAH) and Basic Allowance for Subsistence (BAS) as part of their pay. BAH & BAS Are Tax-Free – Both are excluded from federal income tax. Some states exclude military allowances from state income tax (varies by state). Again, details to discuss with your tax accountant.

These deductions, credits and allowances aren’t an exhaustive list by any means, and some are very specific to special situations, but it goes to show that there are definitely tax benefits for homeowners that can make owning a home more affordable. 

If you have questions surrounding these topics, please don’t hesitate to reach out to one of our Dani Beyer Real Estate team members, or speak to your lender or your tax accountant. As a team, we can best help put you on the best route for your homeownership journey.