How to File Taxes if You Own a Home

Owning a home can change your tax situation, but not always in the way people expect. Some homeowners qualify for deductions or credits. Others take the standard deduction and see little tax change from homeownership. The key is knowing which home-related tax items apply to you.

In this guide, you’ll learn how to file taxes if you own a home, what documents to gather, which deductions or credits to review, and how to avoid common homeowner tax mistakes.

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TL;DR: Quick Decision Guide

• If you paid mortgage interest → look for Form 1098 from your lender.
• If you paid property taxes → keep records, but remember state and local tax deductions may be limited.
• If your standard deduction is higher than your itemized deductions → owning a home may not lower your federal taxes.
• If you made eligible energy improvements → check whether a tax credit may apply.
• If you sold your home → review the home sale exclusion rules before filing.

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Step 1: Gather Your Home-Related Tax Documents

Start by collecting the forms and records connected to your home. Many homeowners miss tax details because documents are spread across lender portals, escrow statements, county tax records, contractor invoices, and closing papers.

Gather:

Document	Why It Matters
Form 1098	Reports mortgage interest and possibly points paid
Property tax statement	Shows real estate taxes paid
Closing disclosure	Useful if you bought, sold, or refinanced
Escrow statement	Helps confirm taxes and insurance paid
Mortgage refinance documents	May affect points or interest reporting
Home energy improvement receipts	May support energy credits
Home office records	May matter if self-employed and eligible
Sale documents	Needed if you sold the home
Improvement records	May affect cost basis when selling

The IRS says itemized deductions may include real estate taxes and home mortgage interest, among other expenses, if you choose to itemize on Schedule A.

What to do:
Create a “Home” folder inside your tax folder. Save lender forms, county tax bills, closing documents, and improvement receipts by tax year.

👉 Explore: Tax software and free filing options in the Marketplace →

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Step 2: Look for Form 1098 From Your Mortgage Lender

If you paid mortgage interest, your lender may send Form 1098, Mortgage Interest Statement. This form reports mortgage interest paid during the year and may also show points or mortgage insurance information, depending on the situation.

Mortgage interest may be deductible if you itemize deductions and meet IRS rules. But receiving Form 1098 does not automatically mean you will benefit from the deduction. You still need to compare itemizing with the standard deduction.

What to do:
Download Form 1098 from your lender’s online portal if it does not arrive by mail. Enter it in your tax software or give it to your tax preparer.

👉 Learn: How Tax Deductions Reduce Your Taxable Income →

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Step 3: Compare Itemizing vs. the Standard Deduction

Owning a home does not automatically mean itemizing is best. You only itemize when your total eligible itemized deductions are higher than your standard deduction.

Common itemized deductions may include:

• Home mortgage interest
• Real estate taxes
• State and local income or sales taxes
• Charitable contributions
• Certain medical expenses above IRS thresholds
• Certain disaster losses

The IRS explains that taxpayers may itemize deductions on Schedule A, and common itemized deductions can include state and local taxes, real estate taxes, home mortgage interest, charitable gifts, and medical expenses above 7.5% of adjusted gross income.

What to do:
Add up your possible itemized deductions, then compare the total to your standard deduction. If the standard deduction is higher, taking it may be simpler and better.

Smile Money Tip:
A home can build financial stability, but it does not guarantee a tax break. The tax value depends on your full return, not just the fact that you own property.

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Step 4: Review Property Taxes

Real estate property taxes may be deductible if you itemize. These taxes are usually paid directly to your county, city, or municipality, or through an escrow account managed by your mortgage lender.

Be careful not to confuse:

• Property taxes
• Homeowners insurance
• HOA fees
• Special assessments
• Utility payments
• Escrow deposits

Property taxes may be deductible, but homeowners insurance, utilities, and HOA fees for a personal residence generally are not deductible personal expenses.

The IRS says certain state, local, and foreign taxes may be deductible as itemized deductions, subject to limitations.

What to do:
Use your property tax statement or escrow statement to confirm the actual tax paid during the year. Do not deduct the full escrow deposit if part of it was for insurance or reserves.

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Step 5: Review Points if You Bought or Refinanced

If you bought a home or refinanced a mortgage, you may have paid points. Points are prepaid interest, and the tax treatment depends on the type of loan and how the points were paid.

In some cases, points paid when buying a main home may be deductible in the year paid. In other cases, such as many refinances, points may need to be deducted over the life of the loan.

What to do:
Check your Form 1098 and closing disclosure. If you paid points, review IRS mortgage interest rules or ask a tax professional before claiming them.

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Step 6: Check Energy Credits for Home Improvements

Some home improvements may qualify for tax credits, especially energy-related improvements. These can include certain energy-efficient windows, doors, insulation, heat pumps, water heaters, solar panels, battery storage, or other qualifying property, depending on the tax year and rules.

The IRS lists energy-related credits under credits and deductions for individuals, and these credits are separate from regular itemized deductions. Recent legislation and IRS guidance can change credit availability, timing, and requirements, so always check the rules for the year the improvement was placed in service.

What to do:
Save contractor invoices, product details, manufacturer certifications if available, and proof of payment. Use Form 5695 if claiming eligible residential energy credits.

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Step 7: Know When Home Office Expenses May Apply

If you work from home as an employee, home office expenses are generally not deductible on your federal return under current rules for most employees.

If you are self-employed and use part of your home regularly and exclusively for business, you may qualify for a home office deduction. This is different from simply answering emails from the kitchen table.

You may need records for:

• Square footage of your home
• Square footage used for business
• Mortgage interest or rent
• Utilities
• Homeowners insurance
• Repairs
• Internet or phone use, if applicable
• Business use percentage

What to do:
Only claim a home office deduction if the space and use meet the rules. If you are unsure, ask a tax professional.

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Step 8: If You Sold Your Home, Review the Home Sale Exclusion

Selling a home can create tax questions, especially if the home increased in value. But not every home sale creates taxable income.

The IRS says if you sell your main home for a gain, you may qualify to exclude up to $250,000 of gain from income, or up to $500,000 if married filing jointly, if you meet the requirements. The IRS also says homeowners excluding all gain generally do not need to report the sale unless Form 1099-S was issued.

You may need sale records such as:

• Closing statement
• Purchase price
• Selling price
• Real estate commissions
• Major improvement records
• Form 1099-S, if issued
• Dates you owned and lived in the home

What to do:
If you sold your home, calculate whether you had a gain and whether you qualify for the exclusion. If you received Form 1099-S, make sure the sale is handled on your return.

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Step 9: Keep Home Improvement Records

Home improvements may not always create a current-year deduction, but they can matter later when you sell. Certain improvements may increase your cost basis, which can reduce taxable gain.

Examples may include:

• Additions
• Major remodels
• New roof
• HVAC replacement
• Solar installation
• Permanent accessibility improvements
• Major landscaping or structural improvements

Repairs are usually different from improvements. Fixing a broken item may be a repair, while adding value, extending useful life, or adapting the home may be an improvement.

What to do:
Keep receipts for major improvements for as long as you own the home, and keep them with your home sale records after selling.

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Common Mistakes to Avoid

• Assuming homeownership automatically lowers taxes
• Filing before downloading Form 1098
• Deducting escrow deposits instead of actual property taxes paid
• Confusing homeowners insurance or HOA fees with deductible taxes
• Forgetting to compare itemizing with the standard deduction
• Throwing away closing documents
• Missing eligible energy credits
• Claiming a home office when the space does not qualify
• Forgetting home improvement records when selling

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FAQs on Filing Taxes if You Own a Home

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Final Thought

Owning a home can affect your taxes, but the benefits depend on your full financial picture. Mortgage interest, property taxes, energy credits, home office rules, and home sale exclusions all have specific requirements.

The best approach is simple: keep good records, compare the standard deduction with itemizing, save improvement documents, and ask for help when buying, refinancing, selling, or using your home for business.

Next Steps:

• 👉 Related: How to Choose Between the Standard Deduction and Itemizing →
• 👉 Read: How to File Taxes After Moving to Another State →
• 👉 Learn: How to Plan Your Taxes Throughout the Year →
• 👉 Explore: Tax software and free filing options in the Marketplace →