Buying and selling a home can significantly impact your tax situation, including what and how much you can deduct from your income taxes.

Here’s a look at a few common expenses the IRS allows you to deduct when you own your home.

Mortgage interest

One of homeowners’ most common tax deductions is the mortgage interest deduction. This allows homeowners to reduce their taxable income by up to $750,000* for the interest paid on their mortgage. This limit applies to single tax filers and couples who file jointly.

If you paid more than $600 for mortgage interest in a year, you’d receive a Form 1068 Mortgage Interest Statement from your lender. These forms typically arrive in December in time for tax filing season.

Note: mortgage interest is an itemized deduction. In other words, you’ll have to itemize your taxes instead of taking the standard deduction.

*The $750,000 limit applies to mortgages taken out after December 15, 2017. The deduction is worth up to $1,000,000 for interest paid on mortgages taken out before December 15, 2017.

Property tax

As a homeowner, you typically pay personal property taxes to your state, county, and other local authorities throughout the year. When you file your federal income tax return, the IRS allows you to deduct these personal property taxes up to a specific limit.

Specifically, the tax law says you can deduct up to $10,000 combined for all state and local taxes. So, if you also plan to deduct your state income or sales tax, these will also count toward that $10,000 limit.

Note: you can only deduct the property taxes paid during the year you’re filing.

You’ll need to itemize your property taxes instead of taking the standard deduction to deduct your property taxes. If your property taxes are paid out of escrow, you’ll find the amount paid on Form 1098 Mortgage Interest Statement. Otherwise, your local tax authority may also provide a copy of the property tax bill for you to use for your tax records.

If you bought or sold your home partway through the year, you could usually deduct any property taxes paid during the tax year—before the purchase or sale.

Discount points

Some homeowners buy discount points from their lender to lower their mortgage interest rate. The IRS will let you fully deduct those points the year you paid them if you meet the following requirements:

  1. You used the loan to purchase or build your main home (where you live most of the time).
  2. The use of points must be a normal business practice in your area.
  3. You did not borrow funds from your lender to pay the points.
  4. The amount paid for points must be clearly itemized on your mortgage statement.
  5. The amount is a percentage of your mortgage principal.
  6. The amount paid is typical (not more than what is usually charged) in your area.
  7. You use cash accounting on your taxes (you report income in the year you receive it and deduct expenses in the year you pay them).
  8. The points weren’t used for stand-alone items like appraisal fees, property taxes, etc.

You can also deduct points paid on a loan used to improve your main home. The requirements listed above still apply.

Home office

If you are self-employed and have a space in your home entirely dedicated to your business or work, the IRS may allow you to deduct home office expenses. The amount you’re allowed to deduct depends on how big your space is and what method you use for calculating the deduction.

For instance, using the simplified method, you’ll measure the square footage in your home office and multiply by the current flat rate (In 2022, you could deduct $5 per square foot of home office space, up to 300 square feet). Using the regular method, you’ll calculate the space as a percentage of the total square footage in your home and deduct a percentage of related expenses.

Read the full set of rules to deduct expenses for business use of the home.

For a complete list of filing requirements, limits and special cases for each of these deductions, visit the IRS website at www.irs.gov.