A home purchase represents a cornerstone of personal finance and wealth planning, offering a chance to build equity and gain a sense of stability.

Yet there’s another perk that’s often overlooked: the substantial tax benefits associated with homeownership. From deducting mortgage interest to leveraging property tax deductions, these advantages not only provide short-term relief but also serve as strategic tools for long-term financial growth. Here are five of the most common ones to look out for.

Mortgage interest deduction

For homeowners who’ve financed their home, the IRS provides a tax deduction based on some or all of their mortgage interest. This can apply to a variety of mortgaged properties, including main homes, second homes, investment homes, condos, co-ops, or even boats (as long as there’s sleeping, cooking, and toilet areas). How much of your mortgage interest you can deduct may vary depending on the amount of financing you received, the year your mortgage was first closed, and your tax filing status.

Property tax deduction

Property taxes are charged by local governments based on the assessed value of a property and are generally used to fund public services such as schools, infrastructure, and emergency services. To take full advantage of a potential property tax deduction, make sure you accurately track and document the property taxes you pay throughout the year. This involves keeping records of any tax bills, receipts, or bank statements that show proof of payment.

It’s also important to understand the limitations of the property tax deduction. For example, it is only available for taxes paid on certain properties, such as a primary residences or vacation homes, and may not apply to those paid on commercial or rental properties. Additionally, there may be restrictions on the amount of property taxes you can deduct in a given tax year.

Capital gains exclusion

Many homeowners have seen increases in their home’s value over the past few years, making the capital gains exclusion one of the most important home-related tax benefits. If you recently sold your home for profit, this perk allows you to exclude a portion of that profit from your taxable income—up to $250,000 if single or $500,000 if married and filing jointly. In other words, you can keep more of the proceeds from your home sale instead of paying a large portion of it in taxes.

The key requirement for the capital gains exclusion is that you must have used your home as your primary residence for at least two of the five years leading up to the sale. Additionally, you can only claim the exclusion once every two years.

To illustrate the potential tax savings from the capital gains exclusion, consider the following example: Jill purchased her home for $300,000 ten years ago. She recently sold it for $600,000, realizing a capital gain of $300,000. Assuming a capital gains tax rate of 15 percent, she’d typically have to pay $45,000 in taxes on the profit. However, since she qualifies for the capital gains exclusion, she can exclude up to $250,000 of the gain from her taxable income, leaving only $50,000 of it to be taxed. As a result, she’d only have to pay $7,500 in capital gains tax—a savings of $37,500.

Home office deduction

For homeowners who maintain a home-based business or work freelance from home some or all of the time, the home office deduction allows them to deduct a portion of their home as a business expense. To qualify, you need a dedicated office space that you use regularly and exclusively for work and that is your principal place of business; a small desk in the corner of your bedroom or dining room that you occasionally use to catch up on work would not count. You can also deduct space that’s used to store inventory or product samples directly related to your business. As with other deductions, make sure to conduct proper documentation and recordkeeping so you can maximize your savings come tax season.

Energy-efficiency tax credits

Beyond potentially reducing your bills, energy-efficient home improvements may help you qualify for additional tax savings. One common type of tax credit available is the Residential Clean Energy Credit, which applies to the installation of renewable energy systems such as solar panels, solar water heaters, wind turbines, and geothermal heat pumps. You may be able to claim 30 percent of the cost of installing these systems as a tax credit, within certain limits set by the IRS.

The Residential Clean Energy Credit applies primarily to systems installed in your main residence, though you may be able to claim some credit for a second home, and they are required to meet specific performance and quality standards. Additionally, you must retain documentation such as receipts and manufacturer certifications to substantiate your claims.

There are many ways homeowners can enjoy tax benefits based on the money they spend to own and maintain their homes. Every person’s tax situation is unique, however, so reach out to your tax advisor or financial professional, who can help you find out what tax deductions or credits may apply to yours.