IRS Pub 530 - Tax Information for Homeowners

IRS Pub 530 – Tax Information for Homeowners – Owning a home comes with numerous financial benefits, including potential tax deductions and credits that can significantly reduce your tax bill. If you’re a homeowner preparing for the 2025 tax year, IRS Publication 530, Tax Information for Homeowners, is an essential resource. This guide explains how to handle various home-related expenses on your federal tax return, from deductible items like mortgage interest and real estate taxes to understanding your home’s basis for future sales. Whether you’re a first-time buyer or a long-term owner, this publication helps you navigate the complexities of homeowner taxes.

In this SEO-optimized article, we’ll break down the key elements of IRS Pub 530, including what’s new for 2025, deductible and nondeductible expenses, and tips for recordkeeping. We’ll draw from the official IRS document to ensure accuracy and relevance. For the full details, you can download the PDF directly from the IRS website: https://www.irs.gov/pub/irs-pdf/p530.pdf.

What Is IRS Publication 530?

IRS Publication 530 provides comprehensive tax guidance for individuals who own homes, including houses, condominiums, cooperative apartments, mobile homes, houseboats, or house trailers equipped with sleeping, cooking, and toilet facilities. It focuses on how to treat common homeownership costs when filing your taxes, such as settlement fees, real estate taxes, sales taxes, home mortgage interest, and repairs. The publication is designed to help you maximize deductions on Schedule A of Form 1040 while avoiding common pitfalls.

Key topics include:

Deductible and nondeductible payments.
Rules for state and local real estate taxes.
Options for deducting sales taxes.
Guidelines for home mortgage interest deductions.
Determining and adjusting the basis of your home.
Importance of keeping detailed records.

This resource is particularly useful for itemizing deductions, claiming energy-related credits, and understanding special rules for cooperatives or military personnel.

What’s New in IRS Pub 530 for 2025?

Tax laws evolve, and the 2025 edition of Publication 530 reflects several updates to help homeowners stay compliant. Here’s a summary of the major changes:

Increased State and Local Tax (SALT) Deduction Limit: The cap on SALT deductions has risen to $40,000 ($20,000 if married filing separately). This limit is reduced if your modified adjusted gross income exceeds $500,000 ($250,000 if married filing separately), but it won’t drop below $10,000 ($5,000 if married filing separately).
Residential Clean Energy Credit: Formerly the residential energy efficient property credit, this now offers a 30% credit for qualified property placed in service from 2022 through 2025, including battery storage technology.
Energy Efficient Home Improvement Credit: This replaces the nonbusiness energy property credit and applies to property placed in service through December 31, 2025. There’s no lifetime limit, and it’s split into sections for energy efficiency improvements and residential energy property expenditures.
Home Energy Audits: Starting in 2024, audits must be conducted by a Qualified Home Energy Auditor certified by a Qualified Certification Program. A written report estimating energy and cost savings is required for claiming credits.
Expired Deductions: The mortgage insurance premiums deduction is no longer available. Home equity loan interest is nondeductible for 2018-2025 unless the proceeds were used to buy, build, or improve your home.
Homeowner Assistance Fund (HAF) Payments: These are nontaxable and don’t qualify for deductions or credits. An optional method allows deducting out-of-pocket mortgage interest and real estate taxes.
Exclusion of Qualified Principal Residence Indebtedness: Extended through January 1, 2026, allowing exclusion from income up to $750,000 if the debt was for your principal residence.

For more on these updates, refer to the “What’s New” section in the publication.

Deductible Expenses for Homeowners

One of the primary benefits of homeownership is the ability to deduct certain expenses on your tax return. According to IRS Pub 530, you can itemize these on Schedule A (Form 1040) if they exceed the standard deduction. Here’s a breakdown:

State and Local Real Estate Taxes

Deductible if uniformly assessed for general public purposes and paid during the tax year, including amounts paid at settlement or through escrow.
For home sales, taxes are prorated: The seller deducts up to the sale date, and the buyer from the sale date onward.
Cooperatives: Deduct your share based on stock ownership if the corporation meets specific IRS tests.
Nondeductible: Service charges (e.g., trash collection), assessments that increase property value (add these to your basis instead).

Sales Taxes

You can elect to deduct general sales taxes instead of state and local income taxes on Schedule A, line 5a.
This includes sales taxes on home purchases or construction materials at the general rate.
Subject to the overall SALT limit.

Home Mortgage Interest

Deductible on acquisition debt secured by your main or second home, used to buy, build, or substantially improve it.
Limits: $750,000 ($375,000 if married filing separately) for debt after December 15, 2017; higher for grandfathered debt.
Includes points (prepaid interest) if they meet IRS tests—deduct in the year paid or amortize.
Reported on Form 1098; refunds of overpaid interest must be reported as income.

Other deductible items include late payment charges (not for services), prepayment penalties, redeemable ground rents, and interest on SBA disaster loans.

Nondeductible Payments and Expenses

Not everything is deductible. IRS Pub 530 clearly outlines items you can’t claim:

Insurance premiums (fire, comprehensive, title, mortgage).
Wages for domestic help.
Depreciation.
Utilities (gas, electricity, water).
Most settlement costs (except deductible taxes and interest).
Forfeited deposits or down payments.
Internet or WiFi fees.
Homeowners or condo association fees.
Repairs (unless part of major remodeling).
Foreign real estate taxes.
Transfer or stamp taxes.

Understanding these helps avoid audit risks and ensures accurate filing.

Figuring the Basis of Your Home

Your home’s basis is crucial for calculating gains or losses when you sell it. Pub 530 explains:

Original Basis: Generally your cost, including purchase price, debt assumed, and certain settlement fees (e.g., legal fees, surveys).
Adjusted Basis: Add improvements (e.g., additions, new roof) and subtract decreases (e.g., insurance reimbursements, depreciation if used for business).
Special cases: For gifts, use the donor’s adjusted basis; for inheritance, fair market value at death.

Track adjustments using a record like Table 3 in the publication to simplify future tax calculations.

Keeping Records: Essential Advice for Homeowners

Good recordkeeping is emphasized throughout Pub 530. Maintain documents like purchase contracts, receipts for improvements, canceled checks, and Form 1098 for at least three years (longer for basis-related items). This supports deductions, credits, and basis claims.

Additional Topics and Resources

Mortgage Interest Credit: For those with Mortgage Credit Certificates (MCCs); claim on Form 8396.
Energy Credits: See Form 5695 for residential clean energy and home improvement credits.
Special Rules: For ministers, military personnel, cooperatives, and discharged indebtedness.

For related guidance, check IRS Publication 936 (Home Mortgage Interest Deduction) or Publication 523 (Selling Your Home).

Conclusion

IRS Publication 530 is a must-read for any homeowner looking to optimize their 2025 tax return. By understanding deductible expenses, recent changes, and recordkeeping requirements, you can potentially save thousands. Remember, this article is for informational purposes—consult a tax professional for personalized advice.

Download the full IRS Pub 530 PDF here: https://www.irs.gov/pub/irs-pdf/p530.pdf. For the latest updates, visit IRS.gov.