Tax Deductions Home Purchase

When I bought my first home in 2019, I had no idea that the purchase itself could be a tax deduction. I had just finished my first year as a freelance graphic designer, and my income fluctuated wildly. The idea of a mortgage being deductible felt like a far-fetched myth, especially with the tax code being as complex as the gig economy itself. It took me months to realize that not only could I deduct my mortgage interest, but other costs tied to the home purchase—like real estate agent fees and attorney costs—were also deductible.^[1]

I remember sitting at my kitchen table, a stack of paperwork from my home purchase in front of me, and feeling overwhelmed. I had heard terms like 'itemized deductions' and 'tax credits' but didn't know how they applied to me. As a gig worker, my taxes were a puzzle every year, and I had to piece them together without guidance. But after talking to a tax professional, I learned that the purchase of a home could be a game-changer for my financial situation, offering deductions I hadn't considered.

Since then, I've made it my mission to understand the ins and outs of tax deductions for home purchases. I’ve worked with real estate agents, mortgage brokers, and tax advisors to uncover exactly what is and isn’t deductible. The key takeaway is that if you’re buying a home—whether for the first time or as an investment—there are several legitimate deductions that can reduce your taxable income, potentially saving you thousands of dollars each year.

Mortgage Interest Deduction: A Game-Changer

As of September 2026, one of the most well-known deductions related to home purchases is the mortgage interest deduction. If you have a mortgage, you can deduct the interest you paid on that loan, up to certain limits. For example, in 2023, the IRS allows a deduction for up to $750,000 in mortgage debt for married couples filing jointly. This can significantly reduce your taxable income, especially if you have a high mortgage payment.^[2]

I remember calculating my mortgage interest deduction for the first time and being surprised by how much it lowered my tax bill. The savings weren’t just from the principal—every dollar I spent on interest was a dollar I didn’t have to pay in taxes. This is especially impactful for those who live in high-cost areas where mortgage payments are steep.

To claim this deduction, you need to itemize your deductions on your tax return. It’s important to track all mortgage-related expenses, including the interest paid each year. Some people use accounting software or spreadsheets to keep track of their mortgage interest, ensuring they don’t miss any eligible deductions.

Real Estate Commission: An Often-Overlooked Deduction

When I bought my home, I paid a real estate agent a commission of about $10,000. At the time, I didn’t think that was deductible. However, I later learned that real estate agent fees are considered part of the cost of purchasing the home and can be deducted if you itemize your deductions.^[3]

The IRS allows you to deduct real estate commissions as part of the cost of the home. This can be especially helpful for those who buy homes in competitive markets where commissions are high. For example, in some parts of California, real estate agent commissions can reach up to 6% of the home’s purchase price.^[4]

I worked with my tax professional to ensure all eligible expenses were included in my deduction. It was a relief to know that not only was my mortgage interest deductible, but other costs like real estate commissions were as well. This helped me reduce my taxable income even further.

Don’t overlook real estate commissions—they can add up to a significant tax saving.

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Closing Costs: More Than Just a One-Time Fee

Closing costs can be a substantial expense when buying a home. These costs often include attorney fees, title insurance, and other administrative charges. Some of these expenses can be deducted on your tax return if you itemize your deductions.

For instance, attorney fees paid during the home purchase process can be deductible. I had a closing attorney who charged about $1,500 for their services, and that was fully deductible. This is especially helpful for first-time homebuyers who may not have a lot of other deductible expenses.

It’s important to keep all documents related to your home purchase, including receipts and invoices, to ensure you can claim all eligible deductions. I kept a folder with every receipt and invoice from the purchase, and it made filing my taxes much easier.

“When I bought my first home in 2019, I had no idea that the purchase itself could be a tax deduction.”— Tax Deductions for Gig Workers editors

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Home Inspection and Appraisal Fees: Hidden Deductions

When buying a home, many people pay for a home inspection and appraisal. I paid around $500 for an inspection and $300 for an appraisal, and I didn’t realize they were deductible. In reality, both of these fees can be deducted as part of the cost of the home.

The IRS allows for the deduction of home inspection and appraisal fees when they are paid as part of the home purchase. This is especially important for those who are buying a home in a competitive market where inspections and appraisals are more common.

I worked with my tax advisor to ensure that these fees were included in my deduction. It wasn’t a large amount, but it helped me reduce my taxable income slightly, and that’s always a win for me.

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Home Improvement Expenses: A Long-Term Deduction

Once you own a home, you may consider making improvements to increase its value. If you do, some of those expenses can be deductible. For example, if you install a new roof or upgrade your plumbing, these costs can be deductible if they improve the home’s value.

I had a contractor install a new HVAC system in my home, and it cost about $6,000. My tax advisor said that since it was a significant upgrade, I could deduct a portion of the cost. This wasn’t a large deduction, but it helped me reduce my taxable income slightly.

It’s important to keep records of all home improvement expenses and ensure they meet the IRS criteria for deduction. These expenses can add up over time, so keeping track of them can save you money in the long run.

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Mortgage Insurance: Not All Premiums Are the Same

Not all mortgage insurance premiums are deductible, but some can be. If you have a conventional loan with private mortgage insurance (PMI), the premiums may be deductible if your income is below a certain level. For example, in 2023, the IRS allows the deduction of PMI for taxpayers with an adjusted gross income (AGI) below $100,000.

I had PMI on my mortgage for the first few years, and I was able to deduct those premiums because my income was within the allowable range. This helped me reduce my taxable income slightly each year.

It’s important to check the IRS guidelines for the current year to see if you qualify for the PMI deduction. This can be especially helpful for first-time homebuyers who may not have a high income.

Don’t assume all mortgage insurance is non-deductible—check your eligibility.

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Property Taxes: A Steady Deduction

Property taxes are another common deduction for homebuyers. These taxes are paid annually and can be deducted if you itemize your deductions. I had to pay around $3,000 in property taxes last year, and that was fully deductible.

The IRS allows for the deduction of property taxes on your primary residence, which can be a significant amount in some areas. This is especially helpful for those who live in high-tax areas where property taxes are steep.

I keep a record of all property tax payments, and I include them in my itemized deductions each year. This helps reduce my taxable income, and I’ve been able to save thousands of dollars over time.

Tax Deductions Home Purchase