Purchasing your first home is exciting. It provides you the opportunity and freedom to individualize it in a way that reflects your personality and lifestyle, and it can also create a strong sense of permanence and community. But just as importantly, homeownership comes with many financial advantages and perks—the ability to build home equity, leverage your borrowing power, and obtain numerous tax benefits, to name a few. In fact, the government encourages homeownership by offering several tax deductions and credits you can claim yearly.

Interest and insurance deductions

In order to qualify for any of these deductions, you must own your home and use it as your primary residence. Here is a list of different ones you can take advantage of.

Mortgage interest

At the onset of purchasing your home, the interest will make up most of your monthly mortgage payment. Therefore, the interest you can deduct from your taxes will be higher at the start, gradually decreasing as you pay down the interest and start paying off the principal. Also, how much you’re able to deduct will also depend on your principal, interest rate, and income taxes. (This information can be found on your mortgage statement.)

In addition, you can potentially deduct the interest from a home equity loan (HELOC), a refinanced loan, a line of credit, or a home improvement loan. The IRS states that as long as the funds are used to “buy, build, or substantially improve” your home, you can deduct the interest. However, be aware that you cannot deduct the interest from a HELOC or line of credit if it’s going toward paying off student loans or credit card debt.

Mortgage points

Many borrowers will pay mortgage (or discount) points to the lender to reduce their interest rate on a loan—each point costs 1 percent of the loan amount. And the more points paid, the lower the interest rate. The IRS allows you to deduct the amount of money you paid on points as long as prequalifying factors have been met. For instance, the amount you paid in points must be itemized on your loan documents, and you can only deduct that amount from your taxes for the year in which you paid them.

Allowable tax deductions 

In addition to the standard deductions that the IRS allows—$27,700 (for married couples filing jointly), $13,850 (for single filers and married individuals filing separately), and $20,800 (for heads of households), you can claim the following itemized deductions and credits.

Property taxes

Taxes are usually calculated based on the location and value of your property. You can receive a deduction for almost any property type, including your primary or vacation home, a boat, an RV camper, or even a property outside the US.

In addition, when selling your home, you won’t have to pay capital gains tax if the appreciation is under $500,000 (if filing as a married couple) or $250,000 (if filing as a single person). However, some restrictions apply. For example, your home must be your primary residence, and you have to have lived in it for two of the past five years. You can also only take this exemption once every two years.

Home office

If you are self-employed—not an employee working from home—and you file your taxes as such, you can deduct your home office based on its percentage of your home’s total square footage. But be careful not to overestimate its size since this can raise a red flag to the IRS.

Home modifications

The cost of modifications to your home for medical reasons can be deducted from your taxes just as long as the expenses exceed 7.5 percent of your adjusted gross income.

Tax credits 

Unlike a mortgage interest deduction, which can help lower your taxable income, tax credits give you a dollar-for-dollar reduction on the taxes you owe.

Mortgage tax credit

Some state and local governments give a Mortgage Credit Certificate to new homebuyers via their lender, which enables them to receive a tax credit based on a percentage of the interest paid. These rates vary by state and range from 10 to 50 percent.

Energy tax credit

Depending on your state, you can receive tax credits for energy-efficiency improvements such as replacing insulation, swapping in energy-efficient doors or windows, and installing solar panels. In addition, you can receive a credit of up to $1,000 for installing an electric car charging station in your home.

To help you navigate the various tax laws, seek the advice of a tax professional who can work with you to determine what you can legally deduct as a homeowner.