Tax benefits for homeowners

Knowing which tax breaks are available to you may help you reduce your tax bill or increase your refund. Here are a few of the most common.

1. Mortgage interest

If your mortgage is $1 million or less,1 generally the interest you pay is tax-deductible. If you haven’t been in your home long, interest is likely a big portion of your monthly payment, so this can be a large deduction.

In addition to mortgage interest on your original mortgage, generally speaking, you also can deduct interest payments if you refinance. In many instances, the mortgage interest deduction also applies to a second home.

2. Property taxes

Generally, you’re allowed to deduct the amount you pay in property taxes.


U.S. average property tax bill

Source: U.S. Census Bureau, 2016

3. Interest on home equity debt

If you took out a home loan or line of credit, to renovate or for some other purpose, it may qualify as home equity debt. The interest is usually deductible on loan amounts up to $100,000 ($50,000 if your status is married filing separately).

4. Energy-efficient home improvements

If you installed energy-efficient windows and doors, or added insulation, you may qualify for a state tax credit. To see if your state offers deductions or credits for energy-efficiency improvements, check the Database of State Incentives for Renewables & Efficiency.

5. Renewable energy

If you installed solar panels, wind or fuel cells, or certain other equipment that uses renewable energy to help power your home, you may qualify for the Residential Energy Efficient Property Credit. To qualify, equipment must have been in service by the end of December 2016, with exceptions for qualified solar electric and solar water heating property. That credit has been extended to include property placed into service through the end of 2021.

Tip: Keep your receipts to make claiming credits easier.

Up to 30%

Credit of the cost of equipment and installation

Source: IRS, 2016

  1. If your filing status is married filing separately, this level is $500,000.
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The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment options.

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