Mortgage interest, property taxes and your first tax return as an owner

The itemizing question comes first

Publication 936 (2025) explains that you can deduct home mortgage interest if you file Form 1040 or 1040-SR, itemize deductions on Schedule A, and the mortgage is a secured debt on a qualified home in which you have an ownership interest.

The key word is itemize. If your total itemized deductions are less than your standard deduction, you would generally take the standard deduction, and mortgage interest and property taxes would not separately reduce your federal income tax. The standard deduction amount depends on filing status and tax year; check the Form 1040 instructions for the year.

That is why a lender's or agent's statement that "you'll save on taxes" deserves a follow-up question: compared with what?

Mortgage interest: what counts and the limits

Publication 936 (2025) explains:

• Home mortgage interest is generally interest on a loan secured by your main home or a second home.
• A qualified home can be a house, condominium, cooperative, mobile home, house trailer or boat with sleeping, cooking and toilet facilities.
• Debt limit, 2025 tax year: you can deduct interest on the first $750,000 of home acquisition debt ($375,000 if married filing separately). Higher limits of $1 million ($500,000 if married filing separately) apply to debt incurred before December 16, 2017.
• Interest on home equity loans and lines of credit is deductible only if the money was used to buy, build or substantially improve the home securing the loan.

Your servicer reports interest you paid on Form 1098, Mortgage Interest Statement. Check it against your records, including interest paid at closing, which appears on your Closing Disclosure.

Points

Points paid to get a mortgage can be deductible, but there are conditions. Publication 936 (2025) describes points as charges also called loan origination fees, maximum loan charges, loan discount or discount points, and includes a flowchart for whether points are fully deductible in the year paid. Conditions include that the loan is secured by your main home, paying points is an established business practice in your area, and the points are not more than generally charged there. Points that do not qualify may need to be deducted over the life of the loan. See points and lender credits.

Mortgage insurance premiums

For the 2025 tax year, Publication 936 says the itemized deduction for mortgage insurance premiums has expired and can no longer be claimed. Check the publication for later years, since rules can change by legislation. See mortgage insurance.

Property taxes

Publication 530 (2025) explains how real estate taxes are split when you buy. For federal income tax purposes, the seller is treated as paying property taxes up to but not including the date of sale, and you are treated as paying from the date of sale, regardless of lien dates under local law. Your share is deductible if you itemize, and the division is generally shown on your settlement statement.

Publication 530 also lists items that are not deductible as real estate taxes, such as itemized charges for services like water usage fees. Read the property tax bill carefully; not every line on it is a tax.

State and local tax limit, 2025 tax year: Publication 530 (2025) says the overall limit on the deduction for state and local income, sales and property taxes increased to $40,000 ($20,000 if married filing separately), reduced for modified adjusted gross income above $500,000 ($250,000 if married filing separately) but not below $10,000 ($5,000 if married filing separately). These limits are set by law and may change in later years; check the current publication.

Records to keep from the purchase

Publication 530 (2025) explains your home's basis, generally what it cost, adjusted for things such as improvements. Basis matters when you sell; Publication 523 covers the sale of a home. Keep:

• the Closing Disclosure and settlement statement;
• the deed;
• receipts and invoices for improvements, with dates;
• each year's Form 1098 and property tax statements.

On how long to keep records, Publication 530 says to keep them as long as they are important for any provision of federal tax law, and that records related to your home's basis may be needed long after purchase. When in doubt, keep purchase and improvement records for as long as you own the home and for some years after selling.

Credits that ended

Publication 530 (2025) notes that residential clean energy credits cannot be claimed for expenditures made after December 31, 2025, and energy efficient home improvement credits cannot be claimed for property placed in service after December 31, 2025. If a seller, contractor or salesperson mentions a federal energy credit, check the current IRS guidance for the tax year in question.

When to ask a professional

Consider a tax professional for your first year as an owner if you also have self-employment income, rent part of the home, bought with someone you are not married to, used homebuyer assistance, or paid significant points.

Tax rules change every year. Use the IRS publication for the tax year you are filing.