Which item(s) are tax deductible for consumers who are buying or renting a home?

When consumers buy or rent a home, certain expenses can provide them with tax deductions, most notably mortgage interest and property taxes.

Mortgage interest is the interest paid on a loan used to purchase a home and is deductible on federal income tax returns for the borrower, which can significantly reduce taxable income. This deduction is a substantial benefit, particularly in the early years of a mortgage when most of the payments consist of interest rather than principal.

Property taxes are another key item that homeowners can deduct from their taxable income. This deduction allows homeowners to reduce the amount of income that is subject to federal taxes, thereby potentially lowering their overall tax burden.

While other costs associated with purchasing or renting a home might be significant, they typically do not qualify as tax-deductible expenses in the same way that mortgage interest and property taxes do. For example, lease interest payments, appraisal fees, inspection costs, closing fees, and title costs are generally not eligible for tax deductions under current tax laws, making the mortgage interest and property taxes the primary deductions available to homeowners.