Short Answer
The main tax benefits of homeownership include deducting mortgage interest on loans up to $750,000, deducting property taxes up to $10,000, and excluding up to $250,000 ($500,000 for married couples) of capital gains when you sell your primary residence. These deductions can significantly reduce your taxable income, especially in the early years of your mortgage when most of your payment goes toward interest.
The mortgage interest deduction allows you to deduct interest paid on up to $750,000 of qualified residence loans. In the early years of a mortgage, most of your monthly payment is interest, so this deduction can be substantial. Property taxes on your primary residence and a second home are deductible up to a combined total of $10,000 per year. This is especially relevant in New Jersey, where property taxes are among the highest in the country. Points paid to obtain a mortgage are also deductible. When you sell your home, you can exclude up to $250,000 of capital gains ($500,000 for married couples filing jointly) if you have lived in the home for at least two of the past five years. Home office deductions, energy efficiency credits, and deductions for home equity loan interest used for home improvements may also be available. Consult a tax professional for personalized advice.
Bob's Advice
Redfin Senior Agent · AI Certified Agent
The tax benefits of homeownership are real, but they should not be the main reason you buy a home. I always recommend talking to a CPA or tax professional to understand how these deductions apply to your specific situation. The tax code changes, and what works for one homeowner may not work for another. I can refer you to trusted tax professionals who understand New Jersey real estate taxes. Let us talk about your goals and make sure you have the full picture.
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