If you own a home—or are thinking about buying one—you’ve probably heard about the tax perks that can help offset some of the costs of homeownership. But with so many headlines around tax reform and mortgage caps, it’s easy to wonder: what deductions are still actually available in 2025?
The good news? Most of the core homeowner tax benefits are still in place this year. You can still deduct mortgage interest, property taxes (within limits), and certain upfront costs—if you itemize your deductions. Plus, if you qualify for a Mortgage Credit Certificate (MCC) through a state or local program, you may be eligible for a valuable tax credit for mortgage interest as well.
However, some of these benefits—particularly around mortgage debt limits and itemization thresholds—are set to change when provisions from the Tax Cuts and Jobs Act (TCJA) sunset after 2025. That means this is a key year to get clarity on what you can claim, and how to plan ahead.
We’ll break down exactly what homeowners can still deduct (and what they can’t), who qualifies for the mortgage interest credit, and how the rules could shift in 2026. If you want to make the most of your mortgage this tax year, this is what you need to know.
Table of Contents
- What mortgage interest deductions still apply
- Understanding the mortgage interest credit (MCC)
- Other homeownership-related tax benefits to know in 2025
- Who qualifies for the Mortgage Interest Credit?
- Itemizing vs. standard deduction—what makes sense in 2025?
- Upcoming changes to watch
- How Harness can support homeowners
What mortgage interest deductions still apply
Despite ongoing tax reform debates, the mortgage interest deduction remains intact for 2025—though it hasn’t returned to its pre-TCJA structure just yet. For most homeowners, this means that mortgage interest is still deductible, but with some important limits and conditions.
What’s still deductible in 2025
If you itemize your deductions on Schedule A of your federal tax return, you may deduct interest on:
- Mortgages up to $750,000 in principal for homes purchased after December 15, 2017
- Mortgages up to $1 million for homes purchased before that date (grandfathered under old rules)
- Up to $375,000 for married filing separately under current law
- Home equity loans or lines of credit (HELOCs)—only if the funds were used to “buy, build, or substantially improve” the home that secures the loan
These limits, introduced under the Tax Cuts and Jobs Act (TCJA), are still in place for 2025. But they are scheduled to revert in 2026 unless extended or modified by new legislation. That means the cap on deductible mortgage debt could rise again to $1 million for new purchases, which is important to consider if you’re planning to buy or refinance soon.
What’s not deductible
Some common homeowner expenses do not qualify for deductions, including:
- Mortgage principal payments
- Homeowners insurance
- HOA or condo fees
- Utilities (gas, electric, water)
- Title insurance or closing costs
- Most home repairs
The IRS also has a full breakdown in its homeownership tax benefits guide.
Why it matters
To take advantage of the mortgage interest deduction, you’ll need to itemize your deductions—which only makes sense if your total deductible expenses exceed the standard deduction ($15,000 for individuals, $30,000 for married couples filing jointly in 2025).
Not sure if itemizing is right for you? This is exactly the type of question a Harness advisor can help you evaluate, with tools like Equity Tax Insights and Net Worth Tracking to run the numbers.
Understanding the mortgage interest credit (MCC)
Not to be confused with the mortgage interest deduction, the Mortgage Interest Credit (MCC) is a separate benefit designed to help low- to moderate-income homeowners make homeownership more affordable.
Who qualifies for the MCC in 2025
To be eligible, you must have received a Mortgage Credit Certificate (MCC) from your state or local housing finance agency—typically as part of a first-time homebuyer program. If you didn’t receive one at the time of purchase, you cannot claim this credit retroactively.
In 2025, the credit allows eligible homeowners to claim up to $2,000 per year in federal tax credits based on a percentage of the mortgage interest paid. That’s a dollar-for-dollar reduction in your tax bill, which can be more impactful than a deduction alone.
How the MCC works
- The MCC program is administered by state or local agencies
- You must apply before closing on your home—typically through your lender
- The certificate will specify the credit rate (usually between 10% and 50%)
- You’ll claim the credit annually using IRS Form 8396
- You can still deduct the remaining interest that wasn’t credited, as long as you itemize
2025 update—program availability
While the federal credit itself remains unchanged for 2025, availability depends on state funding and program renewal. Many states paused or restructured MCC offerings in recent years due to budget constraints. Homeowners who already have a certificate remain eligible, but new MCCs may be limited.
If you’re unsure whether your state currently offers MCCs, a Harness advisor can help you check your eligibility or recommend alternate tax-saving strategies.
Other homeownership-related tax benefits to know in 2025
The tax credit for mortgage interest isn’t the only way homeowners can reduce their tax bill. There are several other benefits to consider—especially if you’re itemizing deductions.
Here’s a look at a few that still apply in 2025.
The SALT deduction (new for 2025)
The State and Local Tax (SALT) deduction allows itemizers to deduct property taxes and either income or sales taxes paid to state and local governments. This deduction was capped at $10,000 for years—but that changed in July 2025.
As part of the Trump administration’s latest tax package, the SALT cap has now increased to $40,000 for married couples filing jointly. The phaseout begins after $500,000 in income, and both figures will increase by 1% each year through 2029, before reverting back to $10,000 in 2030.
Mortgage points
If you paid points to lower the interest rate on your mortgage (or refinance), those can be deducted in the year paid—if the mortgage is for your primary residence and you meet IRS qualifications. This deduction remains unchanged in 2025.
Private mortgage insurance (PMI)
If you’re paying PMI on your mortgage, you may still deduct those premiums—provided you itemize and your income doesn’t exceed the threshold. The deduction begins to phase out at $100,000 (or $50,000 if married filing separately) and remains available in 2025, though its future is uncertain beyond this year.
Energy-efficient home upgrades
Homeowners who installed solar panels, insulation, energy-efficient windows, or similar improvements may qualify for a nonrefundable energy tax credit under the Inflation Reduction Act extensions. This credit can offset a portion of the cost of qualified upgrades made through 2032.
Want to go deeper on the tax side of real estate ownership? Explore our guide to tax-efficient real estate strategies.
Who qualifies for the Mortgage Interest Credit?
The Mortgage Interest Credit is a powerful but often overlooked benefit designed to help lower-income individuals and families afford homeownership. Unlike the standard mortgage interest deduction, which reduces your taxable income, this credit directly reduces your tax bill dollar for dollar.
What it is and how it works
The Mortgage Interest Credit is available to homeowners who were issued a Mortgage Credit Certificate (MCC) by a state or local government agency—typically as part of a first-time homebuyer program. The credit can cover up to 20–25% of your annual mortgage interest (depending on the MCC terms), with a cap of $2,000 per year if your certificate rate exceeds 20%.
This credit remains available in 2025, with no major legislative changes from prior years.
Key eligibility requirements
To claim this credit in 2025, you must:
- Have received a valid Mortgage Credit Certificate (MCC) at the time of your home purchase
- Use the home as your primary residence
- Meet your local program’s income and purchase price limits
- Not have previously owned a home within the last three years (for most MCC programs)
You’ll also need to file IRS Form 8396 to claim the credit—and this can be claimed in addition to the mortgage interest deduction, though the deductible portion must be reduced by the amount of the credit claimed.
Want to see if your mortgage setup qualifies for the credit? A Harness advisor can walk you through the details and help optimize your return.
Itemizing vs. standard deduction—what makes sense in 2025?
For most taxpayers, deciding whether to itemize deductions or take the standard deduction is a key part of maximizing their return. With the Tax Cuts and Jobs Act (TCJA) still in effect and reaffirmed by the 2025 megabill, the decision remains nuanced—especially for homeowners.
Where the standard deduction stands in 2025
As of tax year 2025, the standard deduction remains elevated, with minor inflation adjustments:
- $14,900 for single filers
- $29,800 for married couples filing jointly
- Additional deductions apply for seniors (65+) and the visually impaired
These amounts make it harder for many households to benefit from itemizing, since your total deductions must exceed these figures to make it worthwhile.
When itemizing might be the better move
You might benefit from itemizing if your combined deductions exceed the standard threshold. This often applies if you:
- Pay substantial mortgage interest
- Are subject to high state and local taxes (SALT)—now capped at $40,000 through 2029 per the 2025 bill
- Have significant medical expenses, charitable donations, or other deductible costs
Note: the $40,000 SALT cap only applies to married couples with income up to $500,000, and phases out beyond that, reverting to $10,000 in 2030. Make sure to review your filing status and income to see where you fall.
So—what should homeowners do?
If your mortgage interest, property taxes, and other eligible expenses exceed the standard deduction, itemizing may lead to a bigger tax benefit. However, it requires more documentation and can complicate your filing process. Tools like Harness’s Equity Tax Insights can help clarify where your numbers land before you file.
And if you’re still unsure? A Harness advisor can walk you through itemization strategies tailored to your exact situation.
Upcoming changes to watch
Homeowners may be on stable ground in 2025, but next year could look very different. With many tax provisions set to expire or shift after 2025, it’s critical to keep an eye on what’s coming—and start planning accordingly.
One of the most significant changes on the horizon is the sunset of key Tax Cuts and Jobs Act (TCJA) provisions. If no new legislation is passed before the end of 2025, we could see:
- The SALT deduction cap revert from its new $40,000 limit (phasing out after $500,000 in income) back to just $10,000 in 2030, unless extended.
- The standard deduction shrink, making itemizing more common again.
- Adjustments to mortgage interest deductions, especially for homes purchased or refinanced after 2017, with older rules possibly making a comeback.
These shifts could reduce the value of key homeowner deductions or change who benefits most from them. The phase-out thresholds for high earners will also matter—if your income exceeds $500,000, your SALT benefit already begins phasing down under the current rules.
There’s also the added wrinkle of uncertainty. If Congress makes changes late in the year—as often happens—homeowners may not have much time to react.
That’s why many people are already sitting down with financial professionals to scenario-plan for 2026. If you’re considering buying, refinancing, or taking on home improvements that could carry tax benefits, this is the time to think ahead.
How Harness can support homeowners
Owning a home opens the door to major financial milestones—and valuable tax opportunities. In 2025, the tax credit for mortgage interest and key deductions remain available, but new legislation and looming sunsets mean now is the time to revisit your strategy.
If you’re a first-time buyer or a long-term homeowner, the smartest move is to take a proactive, personalized approach. With changing SALT caps, mortgage interest limits, and evolving policy on the horizon, navigating what’s deductible and what’s not takes more than guesswork—it takes expertise.
That’s where we come in.
Harness connects you with experienced, specialized advisors who understand the fine print—and how to apply it to your unique situation. From optimizing deductions to planning for what’s ahead, we’ll help you build a tax strategy that’s clear, compliant, and working in your favor.
Start making your mortgage work harder for you today.
Disclaimer:
Tax related products and services provided through Harness Tax LLC. Harness Tax LLC is affiliated with Harness Wealth Advisers LLC, collectively referred to as “Harness Wealth”. Harness Wealth Advisers LLC is a paid promoter, internet registered investment adviser. Registration does not imply a certain level of skill or training. This article should not be considered tax or legal advice and is provided for informational purposes only. Please consult a tax and/or legal professional for advice specific to your individual circumstances. This article is a product of Harness Tax LLC.
Content was prepared by a third-party provider and not the adviser. Content should not be regarded as a complete analysis of the subjects discussed. Although we believe the content is reliable, it is not guaranteed as to accuracy and does not purport to be complete nor is it intended to be the primary basis for financial or tax decisions.