Maximize Your Deductions

Homeownership is a great investment, and rewarding in so many ways — building equity, making a house your home, and significant tax benefits. As such, knowing what you’re eligible for is the first step in saving as much as possible. Taxes are complicated and unique to each individual’s situation, so always consult with a tax professional to help determine which deductions make the most financial sense for you.

Mortgage Interest Deduction

For most homeowners, the mortgage interest deduction is the largest tax benefit of homeownership. You can deduct the interest paid on mortgage debt up to $750,000 (for married filing jointly) for homes purchased after December 15, 2017. For older mortgages, the limit is $1 million. This deduction is claimed on Schedule A as an itemized deduction.

Property Tax Deduction

Homeowners can deduct up to $10,000 per year ($5,000 if married filing separately) in state and local taxes, which includes property taxes. This is part of the SALT (State and Local Tax) deduction. Given California’s relatively high property taxes, this deduction can be significant for Sacramento-area homeowners.

Home Office Deduction

If you work from home and use a portion of your home exclusively and regularly for business, you may be able to deduct home office expenses. This can include a proportional share of your mortgage interest, utilities, insurance, and depreciation. Consult a tax professional to ensure you qualify and to calculate the deduction accurately.

Energy Efficiency Credits

The federal government offers tax credits for certain energy-efficient home improvements, including solar panels, energy-efficient windows and doors, insulation, and certain HVAC systems. California also offers additional incentives through various state programs. These credits directly reduce your tax bill (not just your taxable income), making them extremely valuable.

Capital Gains Exclusion When You Sell

When you sell your primary residence, you may be able to exclude up to $250,000 in capital gains ($500,000 for married filing jointly) from your taxable income, provided you have lived in the home for at least two of the last five years. This is one of the most powerful tax benefits available to homeowners.