Owning a home continues to offer meaningful financial advantages, and tax season is an important opportunity for homeowners to take full advantage of them. While many homeowner tax benefits remain unchanged, the passage of the One Big Beautiful Bill Act in 2025 introduced several updates that may affect how homeowners file their 2025 returns.

Understanding which deductions and exclusions still apply — and what has changed — can help homeowners make sound decisions this tax season. Rebecca Graham, CPA, with Carr, Riggs & Ingram, an accounting and advisory firm in Montgomery, shares an overview of key homeowner tax considerations for the 2025 filing year.

Several long-standing tax benefits for homeowners are still available when filing 2025 returns.

Capital Gains Exclusion on the Sale of a Primary Residence
Per Graham, homeowners who have owned and lived in their primary residence for at least two of the past five years may exclude a portion of the gain from taxable income when selling their home.

The exclusion remains capped at $250,000 for single filers and $500,000 for married couples filing jointly and applies only to primary residences.

First-Time Homebuyer IRA Withdrawal
First-time homebuyers may continue to withdraw up to $10,000 from a traditional or Roth IRA without incurring the 10% early withdrawal penalty. As Graham explains, a first-time homebuyer is defined as someone who has not owned a personal residence within the previous two years. 

Home Office Deduction
Homeowners who use part of their home exclusively for business purposes may be eligible for the home office deduction. Taxpayers can choose between the simplified method or the actual expenses method, which can include a portion of mortgage interest, property taxes, insurance, utilities, maintenance and repairs.

Legislation enacted in 2025 made several tax provisions permanent and introduced notable changes for homeowners.

Mortgage Interest Deduction
The mortgage interest deduction limitation was made permanent under the 2025 legislation. Graham notes that homeowners who itemize deductions may deduct mortgage interest paid on loans related to their primary residence and secondary residence.

For the 2025 filing year, the deduction is limited to interest paid on mortgage debt of no more than $375,000 for single filers and $750,000 for married couples filing jointly. Mortgage debt above these limits may affect the amount of interest that can be deducted.

Home Equity Loan Interest Deduction
The deduction for home equity loan interest was also made permanent. This deduction is allowed when loan proceeds are used to acquire or improve a primary or second residence. Home equity debt used for non-housing purposes generally does not qualify.

Property Tax Deductions
Homeowners who itemize may continue to deduct property taxes paid on their primary residence. From 2018 through 2024, the total deduction for state and local taxes was capped at $10,000.

Graham points out that the 2025 legislation significantly increased that cap. Taxpayers with an adjusted gross income below $500,000 may deduct up to $40,000 in state and local taxes paid, potentially making itemizing deductions more beneficial for many homeowners.

Expiration of Energy-Related Tax Credits
Graham also notes that two energy-related tax credits expired at the end of 2025:
 

• The Energy Efficient Home Improvement Credit, which allowed homeowners to claim up to 30% of qualifying expenses for items such as energy-efficient doors, windows, insulation and certain HVAC equipment, applies only to improvements completed before December 31, 2025.
• The Residential Clean Energy Credit for upgrades such as solar panels, wind turbines and battery storage also expired as of December 31, 2025.

As Graham emphasizes, homeownership offers valuable tax benefits, but legislative changes make it more important than ever for homeowners to understand which deductions and credits apply to their specific situation. Whether you’re a first-time buyer, a longtime homeowner or have recently made improvements to your home, thoughtful planning can make a meaningful difference when filing your 2025 return.

This article is intended as information only and does not constitute tax advice. Consult a licensed tax professional for advice.