What Is Tax-Deductible When Purchasing a House?
A North Jersey Homebuyer's Guide to Smart Savings
Buying a home is one of the biggest financial moves you'll ever make. The good news is that homeownership often comes with valuable tax benefits. If you're planning to buy a house in North Jersey in 2025, understanding what's tax-deductible can help you maximize savings and make the most of your investment.
Let's break down what you can, and can't, deduct when purchasing your new home.
Common Tax Deductions for North Jersey Homebuyers
1. Mortgage Interest Deduction
One of the largest deductions available to homeowners is mortgage interest. You can typically deduct interest paid on loans up to $750,000 for your primary or secondary home.
This deduction can be helpful in high-cost areas like Essex, Bergen, or Morris County, where home prices tend to be higher.
💡 Tip: Your lender will send you a Form 1098 each January showing how much mortgage interest you paid that year.
2. Property Tax Deduction
New Jersey property taxes are among the highest in the nation, which makes this deduction especially valuable for North Jersey homeowners.
You can deduct up to $10,000 total for state and local taxes (including property taxes) on your federal return.
Even though there's a cap, it still provides significant savings for many households in towns like Montclair, Glen Ridge, and West Orange.
3. Mortgage Points (Discount Points)
If you paid points to lower your interest rate to buy or build your main home, those may be tax-deductible in the year you purchased your home.
🧾 Keep all your closing documents, such as your lender's settlement statement, which will show exactly what you paid in points.
4. Mortgage Insurance Premiums (PMI)
If your down payment was less than 20%, you may be paying private mortgage insurance (PMI). Depending on your income level, you might be able to deduct PMI premiums as mortgage interest.
5. Home Office Deduction (For Eligible Buyers)
If you run a business or work remotely from your home, you may be able to claim a home office deduction.
To qualify, you must use your office space regularly and exclusively for business purposes. This deduction can include a portion of your mortgage interest, utilities, property taxes, and homeowners' insurance.
What's Not Tax-Deductible When Buying a Home
Unfortunately, you can't write off every expense of your home purchase. These standard costs are not deductible:
Closing costs (other than points)
Home inspection fees
Title insurance
Appraisal fees
Moving expenses (except for military members)
Homeowner association (HOA) fees
While these aren't deductible, they can affect your cost basis when you sell your home later, which could reduce your taxable gain.
Other Tax Benefits of Homeownership
Beyond annual deductions, buying a home in North Jersey can offer long-term tax advantages:
Capital Gains Exclusion: When you sell your primary home, you can exclude up to $250,000 ($500,000 for married couples) in capital gains, as long as you've lived there for two of the past five years.
Energy Efficiency Credits: If you make upgrades like solar panels or energy-efficient windows, you may qualify for federal energy tax credits.
Your Partner in North Jersey Homeownership
When you understand how taxes work in your favor, you can make smarter decisions from the start.
At The Beckwith Team, we help North Jersey buyers every step of the way, including finding the right property and connecting you with trusted lenders, attorneys, and tax professionals who can help you maximize your savings.
Ready to explore homeownership in North Jersey?
Let's connect and create a plan that fits your goals and your budget.
Disclaimer:
The information in this article is for general educational purposes only and should not be considered tax or financial advice. Tax laws and regulations change frequently and can vary based on individual circumstances. Always consult a qualified tax professional or financial advisor for guidance specific to your situation.