FAQ: Tax Deductions on a New Home
Whether it’s your first house or your fifth, buying a home brings up an important question: “Can I deduct the cost of my new house on my taxes?”
👉 The short answer is no—you cannot deduct the cost of the home itself. However, there are costs associated with owning a home that can be used as tax deductions.
Here’s what you need to know.
Buying a Home Is Not a Tax Deduction
It’s a common assumption: I just bought a house, so I’ll get a big tax deduction this year.
Unfortunately, that’s not the case. The IRS does not allow taxpayers to deduct the purchase price of their home, their down payment, or most of their closing costs.
While buying a home can have some tax benefits, the act of purchasing it isn’t something you can write off on your tax return. Certain costs associated with owning a home, however, can be used as tax deductions.
What Is Deductible?
According to the IRS, only certain costs related to owning a home are allowed as tax deductions. These include:
State and local real estate taxes, subject to the $10,000 limit
Home mortgage interest within allowed limits
Mortgage insurance premiums
It’s worthy to note that these expenses are only deductible when you itemize. For more information about what itemizing means, check out our guide here.
Keep Records for the Future
Even though the cost of your home isn’t deductible, that doesn’t mean you can toss all the paperwork. Keeping good records now can save you time and money down the road.
Hang onto your closing documents, mortgage interest statements (Form 1098), and annual property tax bills.
👉 TIP: Give a copy of your receipts for property taxes and mortgage interest paid each year to your tax preparer. If you are eligible to itemize and use these deductions, our team will add these to your tax return.
If you make any improvements to your home (adding a deck, finishing the basement, etc.), keep those receipts too. These improvements can increase your home's basis, which may reduce the taxable gain if you sell the property later.
It’s also helpful to document any points paid at closing, as those may be deductible in certain situations.
What You Can and Can’t Deduct
Buying a home doesn’t come with an automatic tax deduction, but that doesn’t mean there are no tax benefits to homeownership. Understanding what you can deduct and what’s just part of your purchase helps you file a more accurate return and avoid disappointment.
If you’re not sure whether you should be itemizing, how to handle the sale of a previous home, or what records you should be saving, we’re here to help.
👉 Have questions about how your home purchase fits into your taxes? Let’s sort it out ahead of tax time.
Sources:
Tax benefits for homeowners from Internal Revenue Service
About Publication 530, Tax Information for Homeowners from Internal Revenue Service
FAQ: Standard Deduction vs. Itemizing from Kelsey Glass CPA, PLLC