Can I Claim My House on Taxes? What You Need to Know

Owning a home comes with significant expenses, but tax deductions can help offset some costs. While you can’t deduct the full cost of your house, certain homeownership expenses may qualify for tax benefits. Understanding what qualifies and how to claim these deductions can reduce your overall tax bill.

Several factors determine which deductions apply, including how you use your home and whether it generates income. Knowing the rules helps maximize savings while ensuring compliance with IRS guidelines.

Classification as a Primary Residence

The IRS defines a primary residence as the home where you live most of the time. This classification affects eligibility for tax benefits, including capital gains exclusions when selling the property. To qualify, you must show that the home is your main residence, typically through your tax return address, voter registration, and utility bills.

To exclude capital gains from taxes when selling a home, you must have lived in it for at least two of the last five years. If you meet this requirement, you can exclude up to $250,000 of profit from capital gains taxes if filing as a single taxpayer or up to $500,000 if married and filing jointly. If you move frequently or own multiple properties, determining which home qualifies as your primary residence can be more complicated.

Certain life events, such as job relocations or health-related moves, may allow for partial exclusions if you don’t meet the full two-year requirement. If you convert a rental property into a primary residence, the IRS may apply depreciation recapture rules, requiring you to pay taxes on previously claimed deductions.

Mortgage Interest Deductions

One of the most significant tax benefits of homeownership is the mortgage interest deduction. In 2024, homeowners can deduct interest on mortgage debt up to $750,000 if filing jointly ($375,000 for single filers), a limit set by the Tax Cuts and Jobs Act of 2017. This applies to loans used to buy, build, or substantially improve a home. Refinancing or home equity loans may also qualify if the funds are used for renovations.

The deduction applies only to interest, not principal payments, and the mortgage must be secured by the home. Home equity loan interest is deductible only if the funds are used for home improvements. Using these loans for personal expenses, like paying off credit card debt, does not qualify.

To claim the deduction, homeowners must itemize deductions on Schedule A of Form 1040 instead of taking the standard deduction. Since the standard deduction in 2024 is $29,200 for married couples filing jointly and $14,600 for single filers, itemizing only makes sense if total deductions exceed these amounts.

Property Tax Deductions

Homeowners can deduct state and local property taxes, but the deduction is capped at $10,000 for married couples filing jointly or $5,000 for single filers. This cap includes property taxes and either state income taxes or sales taxes, meaning taxpayers in high-tax states may reach the limit quickly.

To qualify, property taxes must be based on the home’s assessed value and imposed by a state, local, or foreign government. Fees for services like garbage collection or water do not qualify. Only taxes paid during the tax year are deductible, so prepaid amounts for future years don’t count until those years arrive. If property taxes are paid through an escrow account, only the amount disbursed by the lender to the taxing authority during the year is deductible.

When a home is bought or sold, property taxes are typically split between the buyer and seller based on how long each owned the home. The IRS allows each party to deduct only the portion they were responsible for, even if one party paid the full amount at closing. Reviewing the settlement statement helps determine the deductible share.

Home Office Deductions

Homeowners who use part of their home exclusively for business may qualify for a home office deduction. The space must be used regularly and solely for work, meaning a guest bedroom with a desk wouldn’t qualify if it’s also used for personal purposes. This deduction is available to self-employed individuals and independent contractors, but employees working remotely due to employer policies cannot claim it under current tax law.

There are two ways to calculate the deduction: the simplified method and the actual expense method. The simplified method allows a deduction of $5 per square foot of office space, up to 300 square feet, for a maximum deduction of $1,500. The actual expense method requires determining the percentage of the home used for business and applying that percentage to eligible expenses such as utilities, homeowners insurance, and depreciation. For example, if a home office occupies 10% of a residence, then 10% of qualifying expenses can be deducted.

Renting Out Part of the House

Homeowners who rent out part of their residence must report rental income but can deduct expenses related to the rental space. These deductions include repairs, property insurance, and depreciation, based on the percentage of the home used for rental purposes. For example, if 25% of a house is rented, then 25% of eligible expenses can be deducted.

If a space is rented for fewer than 15 days in a year, the income does not need to be reported, and no deductions can be claimed. This “14-day rule” benefits homeowners who occasionally rent out their property for short-term stays.

Vacation Home Usage

Owning a second home used for both personal and rental purposes has tax implications. The IRS classifies a vacation home as a rental property if it is rented for more than 14 days and personal use does not exceed the greater of 14 days or 10% of total rental days. In this case, rental income must be reported, but expenses such as mortgage interest, property taxes, and maintenance can be deducted proportionally.

If personal use exceeds these thresholds, the home is classified as a personal residence, limiting deductible expenses to mortgage interest and property taxes. Rental-related deductions are restricted to the amount of rental income earned.

Tax Credits for Energy Improvements

Homeowners making energy-efficient upgrades may qualify for tax credits, which directly reduce taxes owed. The Inflation Reduction Act of 2022 expanded these incentives.

The Energy Efficient Home Improvement Credit covers 30% of eligible costs for upgrades such as insulation, energy-efficient windows, and heat pumps, with an annual cap of $1,200. The Residential Clean Energy Credit offers a 30% credit for solar panels, wind turbines, and battery storage, with no annual limit. To claim these credits, homeowners must retain receipts and manufacturer certifications to ensure compliance with IRS guidelines.