6 Homeowner Tax Tips for 2025: What to Know Before You File
The April 15 deadline is here. If you own a home or bought one in 2025, there are some important tax rules that could save you money or cost you if you miss them. Here are six homeowner tax tips for 2025 every homeowner should know before closing the books.
If any of this prompts questions specific to your situation, I want to point you toward someone I personally use and trust. Garett Steiner is my CPA at Smith Dickson CPAs. I use him for both personal and business taxes and he is one of the most knowledgeable people I know in this space. This is not a paid promotion. Reach him directly at garett.steiner@smithdickson.com.
We also recorded a free webinar together on homeowner tax benefits. Watch it here at your leisure.
1. The Mortgage Interest Deduction Has a Cap
If your mortgage was taken out after December 15, 2017, you can only deduct interest on the first $750,000 of your loan balance ($375,000 if married filing separately). Mortgages originated before that date still qualify under the older $1 million limit, but refinancing can reset you to the lower cap.
For Southern California homeowners carrying jumbo loans, this matters. If your balance exceeds $750,000, only a proportional share of your interest is deductible. The One Big Beautiful Bill Act signed in July 2025 made this $750,000 cap permanent, so the previous $1 million restoration that was expected after 2025 is no longer happening. See IRS Publication 936 for the full rules.
2. The SALT Cap Increased to $40,000 for 2025, But Income Limits Apply
The State and Local Tax (SALT) deduction cap was raised from $10,000 to $40,000 for the 2025 tax year under the One Big Beautiful Bill Act. This covers your combined property taxes and state income taxes and is a significant win for California homeowners.
The catch: the full $40,000 is only available if your modified adjusted gross income (MAGI) is under $500,000. Above that threshold, the cap phases down by 30 cents for every dollar over the limit. It cannot drop below $10,000 regardless of income. For example, a couple filing jointly with $530,000 MAGI would see their SALT cap reduced to $31,000. Check with your CPA to confirm where you land.
3. Sold a Home in 2025? Know Your Capital Gains Exclusion
If you sold your primary residence in 2025, you may be able to exclude up to $250,000 in profit from federal taxes ($500,000 if married filing jointly) under IRS Section 121. To qualify, you must have owned and used the home as your primary residence for at least two of the last five years. Those two years do not need to be consecutive.
If your gain exceeds the exclusion, only the amount above the threshold is taxable. Two things that often catch sellers off guard: if you ever rented the property or claimed a home office deduction, depreciation recapture rules may apply. Also, this exclusion can only be claimed once every two years. For full details see IRS Publication 523.
4. Energy Upgrade Credits Expired After 2025. Claim Them If You Qualify.
Both the Energy Efficient Home Improvement Credit (Section 25C) and the Residential Clean Energy Credit (Section 25D) expired on December 31, 2025 under the One Big Beautiful Bill Act. If you made qualifying upgrades last year, this is your last opportunity to claim them.
The Energy Efficient Home Improvement Credit was worth up to $3,200 per year for improvements like insulation, windows, doors, and HVAC systems. The Residential Clean Energy Credit covered 30 percent of the cost of solar panels, geothermal heat pumps, and battery storage with no dollar cap. Neither credit is available for property placed in service after December 31, 2025, and neither can be carried forward to a future return. See the IRS Home Energy Tax Credits page for more detail.
5. Refinance Points Are Usually Deducted Over the Life of the Loan
If you refinanced in 2025 and paid points, you generally cannot deduct them all in year one. Unlike points on an original purchase, refinance points are typically spread out over the life of the loan. On a $3,000 points payment for a 30-year refinance, that works out to $100 per year.
The exception: if you used a portion of the refinanced funds for substantial home improvements, the points tied to that portion may be deductible upfront. Talk to your CPA if you refinanced and paid significant points.
6. Capital Improvements Lower Your Taxable Gain When You Sell. Keep Every Receipt.
Every qualifying capital improvement, such as a kitchen remodel, new roof, ADU buildout, or new HVAC system, increases your cost basis and reduces your taxable gain when you eventually sell. Routine maintenance and repairs do not count, but permanent upgrades that add value or extend the life of the property do.
In Southern California, where appreciation has been significant over the last decade, this documentation can make a real difference if your gain approaches or exceeds the Section 121 exclusion limits. Keep permits, contractor invoices, bank records, and photos organized throughout your ownership.
Have Questions? Talk to a Trusted CPA.
For anything specific to your situation, I recommend speaking with a qualified CPA. Garett Steiner at Smith Dickson CPAs is my personal recommendation. He handles both my personal and business taxes. Reach him at garett.steiner@smithdickson.com.
And watch the free homeowner tax benefits webinar Garett and I recorded together: Watch the Webinar.
As always, if you have questions about buying, selling, or understanding your home’s value in Long Beach, LA, or Orange County, I am here. And if you are earlier in the process, check out our upcoming First Time Homebuyer Seminars and real estate education events to learn more before you make a move.
David Sanchez
Your Realtor and Community Ambassador
Living CA Realty | Brokered by eXp Realty
562-537-9206 | David@LivingCARealty.com