Home Tax Benefits Overview

Learn more about the tax benefits of home ownership

There are many benefits of buying a home, including the privacy of having your own space, the convenience of having more rooms and storage, the sense of pride you get in caring for it, and the tax breaks and credits you could receive. Some of the tax benefits of buying a home include deducting interest paid on the mortgage and taxes. You can also find tax credits for improvements like energy-efficient renovations. The available tax credits can change yearly, so check the website of the Internal Revenue Service to learn which credits and deductions are available. Historically, tax benefits have included the four listed below.

Four tax benefits of home ownership

There are four areas in which homeowners can qualify for tax deductions or credits, and different restrictions apply to each. Be sure to consult your tax advisor or visit the IRS website for specific eligibility.

  1. Real estate taxes: The real estate tax is an annual tax on the value of your property. You can deduct this tax if:
    • It is based on the assessed value of real property and there is a uniform rate charged on all property in the area
    • The tax is for the welfare of the general public and not payment for a special privilege or service you received
    • You paid this tax at either settlement or closing, or to a taxing authority during the year


  2. Sales tax: You can deduct state and local taxes as general sales taxes rather than itemizing them. This includes:
    • Sales taxes paid on a home
    • Sales taxes paid on home building materials if the tax rate was the same as the general sales tax rate


  3. Home mortgage insurance: You might be able to take an itemized deduction for premiums you pay or collect on mortgage insurance connected with any debt from buying your home.


  4. Home mortgage interest tax: When people refer to 'home tax benefits' or 'mortgage tax breaks,' this is most likely what they're talking about. This mortgage interest tax deduction applies to any taxes you pay on mortgage or home equity loan interest.

Find out if you qualify for a mortgage interest tax deduction

The interest on home mortgages is usually tax deductible. If you are currently paying interest on a loan in any of the following circumstances, you may be eligible for the mortgage interest tax deduction. Eligible interest includes that which is paid on:

  • A loan for a primary or second home
  • A first or second mortgage
  • A home improvement loan
  • A home equity loan

The IRS provides detailed answers to common questions about mortgage interest tax deduction specifics, and you can visit their website to learn more about the tax benefits of buying a home that may apply to you as a homeowner.

Learn more about mortgages from Citizens Bank

Whether you're looking to buy your first home or your fifth, you may still have questions about the mortgage process. Get answers to your questions by calling a Citizens Bank home loan originator at 1-888-514-2300.

Note: This is not tax advice. Consult your tax advisor or the IRS for specific eligibility.

 

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