Do You Get a Tax Credit for Buying a House?
While a general homebuyer credit is unavailable, homeownership still offers significant tax advantages. Learn how these benefits work to lower your tax bill.
A broad federal tax credit for buying a house is not currently available, but homeownership offers several tax benefits. The First-Time Homebuyer Credit, which was available from 2008 to 2010, has expired and has not been replaced by a similar program. While proposals for new homebuyer credits sometimes circulate, none have been enacted into federal law as of mid-2025.
Instead, the tax code provides advantages through targeted credits and a range of deductions. These provisions can lower a homeowner’s tax liability in the year of purchase and for years afterward.
Understanding Tax Credits vs. Tax Deductions
Understanding the difference between a tax credit and a tax deduction is necessary to maximize homeownership tax benefits. A tax credit offers a dollar-for-dollar reduction of your tax liability. If you owe $5,000 in taxes and have a $1,000 credit, your final bill is $4,000.
A tax deduction, on the other hand, reduces your taxable income, which is the amount of income subject to tax. For example, if you are in the 22% tax bracket and claim a $1,000 deduction, you save 22% of that amount, which reduces your tax bill by $220.
Because credits directly reduce the tax owed, they are more impactful than deductions. The value of a deduction is tied to a taxpayer’s highest tax rate, while a credit provides the same dollar benefit to everyone who claims it.
Available Tax Credits for Homeowners
Specific federal tax credits can provide savings for homeowners. One is the Mortgage Credit Certificate (MCC), a program administered by state and local housing finance agencies. The MCC allows qualifying low- and moderate-income, first-time homebuyers to convert a portion of their mortgage interest into a tax credit. The credit is a percentage of the interest paid, between 10% and 50%, with a maximum annual credit of $2,000.
Eligibility for an MCC is determined by the issuing agency and includes income and purchase price limits, which vary by location. The home must be the buyer’s primary residence, and homebuyers must apply for the certificate through their lender before closing on the home.
Homeowners can also benefit from energy-related tax credits. The Residential Clean Energy Credit offers a 30% credit for the cost of new, qualified clean energy property installed from 2022 through 2032. This credit has no annual dollar limit, except for fuel cell property. Qualifying expenses include:
- Solar electric panels
- Solar water heaters
- Geothermal heat pumps
- Battery storage technology
A separate credit, the Energy Efficient Home Improvement Credit, is for other energy-saving upgrades. This provides a 30% credit on qualified improvements, with an annual maximum of $1,200. Specific items have their own limits, such as $600 for exterior windows and $250 per door up to a $500 total. A higher annual limit of $2,000 applies to installations like electric heat pumps and biomass stoves.
Key Tax Deductions for Homeowners
The mortgage interest deduction allows homeowners to deduct the interest paid on a mortgage used to buy, build, or improve a primary or secondary residence. Under current law, interest can be deducted on up to $750,000 of mortgage debt ($375,000 for those married filing separately). This limit is scheduled to revert to $1 million at the end of 2025.
The state and local tax (SALT) deduction is where property taxes are claimed. Homeowners can deduct real estate taxes paid to state and local governments, subject to a combined cap of $10,000 per household per year. This cap includes property taxes plus either state or local income or sales taxes. The SALT deduction cap is also scheduled to expire at the end of 2025.
Homebuyers may also be able to deduct mortgage points, which are fees paid to a lender to secure a lower interest rate. Each point costs 1% of the loan amount. To be fully deductible in the year of purchase, the loan must be for a primary residence and the payment of points must be an established business practice in the area. If the points do not meet all requirements, they must be deducted over the life of the loan.
How to Claim Homeownership Tax Benefits
To claim tax deductions for homeownership, a taxpayer must itemize deductions rather than taking the standard deduction. This is worthwhile only if the total of all itemizable expenses, such as mortgage interest and state and local taxes, exceeds the standard deduction for their filing status. For the 2025 tax year, the standard deduction is $30,000 for married couples filing jointly and $15,000 for single filers.
The process of claiming these benefits requires specific tax forms. Homeowners receive Form 1098, Mortgage Interest Statement, from their lender, which reports the mortgage interest and any points paid. This information is used to complete Schedule A (Form 1040), Itemized Deductions, where mortgage interest and property taxes are reported.
Claiming tax credits involves different forms. To claim the Mortgage Credit Certificate (MCC), the homeowner must file Form 8396, Mortgage Interest Credit. For energy-related credits, homeowners file Form 5695, Residential Energy Credits. The final credit amounts from these forms are reported on Schedule 3 (Form 1040) to reduce the taxpayer’s final tax liability.