If you’re thinking about becoming a homeowner any time soon, there are tax benefits to buying. In particular, tax deductions are one way to reduce your tax bill and income. Tax deductions are different from credits. Credits are money that gets taken off a tax bill. You can think of them somewhat like a coupon. A tax deduction reduces your adjusted gross income or AGI, reducing your tax liability.

The following are key tax benefits and things to know for homebuyers or possible homebuyers.

 In July 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, introducing several changes that impact homeowners' taxes.

Here's a summary of key changes for homeowners:

• State and Local Tax (SALT) Deduction: The cap on the SALT deduction has been raised to $40,000 ($20,000 for married individuals filing separately) for 2025 through 2029, according to ssb-cpa.com. This cap will be subject to 1% annual inflation adjustments. Starting in 2030, the cap is scheduled to revert to the previous limit of $10,000 ($5,000 for married individuals filing separately) unless further congressional action is taken.
• Mortgage Interest Deduction: The $750,000 limit for the mortgage interest deduction has been made permanent by the OBBBA, according to the Bipartisan Policy Center. This means the limit will not increase to $1 million after 2025, as was previously scheduled. Mortgage insurance premiums are also restored as eligible for the deduction.
• Home Equity Debt Interest: The OBBBA permanently eliminates the deduction for interest on home equity debt, unless the debt was used to buy, build, or substantially improve the taxpayer's home, says Duane Morris LLP.
• Energy Efficiency Tax Credits: Federal tax credits for energy-efficient home improvements and clean energy equipment are available through December 31, 2025. These include the Energy Efficient Home Improvement Credit (up to $3,200) and the Residential Clean Energy credit (30% for rooftop solar, wind, geothermal heat pumps, and battery storage).
• Residential Energy Credits: These credits will generally terminate and not be available after 2025.

Note: It's important to remember that tax laws can be complex and subject to change. Consulting with a qualified tax professional is recommended for personalized advice and clarification on specific situations. You can also refer to official IRS publications for the most up-to-date and comprehensive information.

When you’re buying a home, of course, you want to know that it’s safe. When you buy a property, you need to follow some requirements, one of which may be getting a certificate of occupancy. A certificate of occupancy is also called a CO. The general idea behind the CO is that it verifies a property is suitable to live in.

Beyond that, the following are more details to know about a certificate of occupancy.

The Basics

The certificate of occupancy is a document that shows a structure, like a house or office, is safe for inhabitation. A CO includes what the property is legally classified as in terms of zoning. For example, the CO will indicate whether the property is for residential, commercial, retail, industrial or mixed-use. That means that the property is being used as it’s meant to be. For example, residential property should be used as a primary residence.

A CO verifies a property is up to code and in compliance.

The third thing a CO does is show that a property is suitable for occupation based on the standards in the municipality where it’s located.

A CO will include, along with verification that a property is up to code, the property address, a legal description including square footage, the zoning code, the owner, and any additional notes that might be relevant to the property’s safety.

When Do You Need a CO?

Local rules and specific situations determine if you need a certificate of occupancy to sell a house.

If you have a converted space, you’ll need one. Basically, what this could mean is that if you were selling a multi-family home but converting it into a single-family home before doing so, the certificate needs to show the code change. If you’re converting a business into a residential space, again, you’ll need a CO showing the change.

If you’ve made a lot of renovations, you’ll need a CO to sell it.

If you’ve done any type of remodeling, it’s best to verify whether you need a CO or not before you try to sell a home.

If you didn’t have a CO before, but you need one to sell the home, then you might have to make changes to get it up to code.

If you built a new house to sell, you’d need a CO as part of the sale.

When your home was built, there was probably a CO issued. As long as you haven’t made any major renovations or the building code hasn’t changed, then you should be able to use that one.

How Do You Get One?

If you do need a CO, then you can contact your local zoning or building department. There should be a website in the city or town where you live to indicate who to contact.

If you have an existing home, you can apply for a CO at your local building department. Sometimes you might need to show architectural plans to apply if there were extensive renovations or the home was just built.

Finally, if you do need a CO, someone has to come from the local government and inspect the home. It’s not the same as a home inspection that occurs when you’re doing a real estate transaction.

During a CO inspection, the professional will come and compare the building to the current code and make sure there are no violations. They’ll look at general building components, plumbing, electrical, fire safety, and more minor elements.

Then, at the end of the inspection, you get a report.

If you passed the inspection you can claim your CO and go forward with the home's sale. If you don’t pass, then you’ll receive a list of what needs to be fixed within a particular window of time. Once you make the repairs, you’ll have another inspection before you can move forward.

If you need a CO and you don’t get one, your transaction might not go through because a lender will not want to provide financing for a home that isn’t safe. You might also be fined by your municipality or sued.

As a final note, in some municipalities, you need a new certificate of occupancy each time you sell a property or when a new tenant moves in if it’s a rental. If you aren’t sure about anything, check with your local building or zoning authority.

How much can you afford to borrow when getting ready to buy a home? That depends upon several factors, some more important than others. Affordability is generally determined by your monthly payment. Your monthly payment is affected by current market rates and the size of your home loan. In addition, the length of your loan will also affect the monthly payment. Shorter term loans for example may have a slightly lower rate but because the loan is squished into a 10 year term compared to the more common 30 year loan, the payment will be higher.

So let’s start. Generally speaking, the mortgage payment should be around one-third of your gross monthly income. When lenders evaluate affordability, they look at not just the mortgage payment but also an amount for monthly property taxes and insurance. That’s the number they use, not just your principal and interest payment. If the gross monthly income of all borrowers on the note amount to $9,000, then lenders like to see your total payment around $3,000.

But what about all your other bills, are they factored into that one-third amount? No. Other payments that would appear on a credit report are included. This includes both installment and revolving debt. Installment debts are those such as an auto loan that has fixed payments every month. Over time, the car is eventually paid off. The car payment is figured into this amouint, but only if there are more than 10 payments remaining. Revolving debt is like your credit card. The balance can change every month and so will the payments. Everyday bills such as utilities, food, etc won’t count. For this payment lenders like to see these bills be around 40-43% of gross monthly income.

However, how much you can borrow can also depend upon your credit scores. Borrowers with high credit scores might be able to borrow more than someone with less than stellar credit. Your loan officer will help you out with these numbers if you need some assistance early on.

Finally, how much you can borrow also depends upon how comfortable you are with the new monthly payments. It might surprise some to find out they can qualify for compared to what they’re paying now in rent. If you're told you can borrow up to a certain amount but you’re not comfortable with that amount and would like to borrow less, by all mean, pay what you feel comfortable with, not necessarily how much your lender said you can borrow.

Being a freelancer, contract worker, gig worker, or anyone self-employed is more common and popular than ever right now. There are downsides, such as the lack of benefits like health insurance. At the same time, there are more upsides for many professionals who choose to work this way.

Upsides include freedom and flexibility to make your own schedule, unlimited earning potential, and the ability to have the work-life balance that allows you to create your own lifestyle.  

There is an issue that can arise if you’re a freelancer or contractor, though.

How do you get a mortgage? When you apply for a mortgage as a traditional employee, you’ll probably show your proof of income through your job, but it can be a bit trickier if you don’t have a traditional employer. You’re also going to face more scrutiny from lenders.

Keep Up with Relevant Documents
Over the years, it’s easy to be disorganized as far as how you keep up with your earnings and expenditures, but come time to apply for a mortgage that can be problematic.

As a freelancer or anyone who’s self-employed, it’s normal that your income is going to fluctuate, and you’ll have up and down periods.

What you want to be able to show a lender is your long-term earning average.

You should be able to calm the fears of your lender by showing them at least several years’ worth of documents highlighting your earnings.

You need to be able to demonstrate a pattern of earning. If you aren’t able to do that just yet, you might have to hold off on buying a home.

Even better than showing steady earnings is being able to show upward trends.

Another note—if you’re self-employed, you likely try to write off as many of your business expenses as you can at tax time. This is understandable, but you also want to show as high an income as possible, so if you’re thinking about buying a home anytime in the future, keep that in mind with your deductions.

Be prepared to show at least two years of tax returns, which will likely be your 1099s instead of your W2s.  Beyond your tax returns, you may want to be able to show your bank statements, and any profit and loss statements. You can also provide letters from clients showing that you have a stable relationship.

Income Calculation
Your income is calculated differently if you’re a freelancer. Your lender will calculate an average monthly income by dividing the past two years of your adjusted gross income by 24.

Save As Much As You Can
You should aim to save at least 20% of the purchase price of a home because this will let you avoid paying for private mortgage insurance. You also want to be able to show your reliability as a borrower, so with that in mind, the bigger the downpayment you can make, the better.

Clean Up Your Finances
You can face more headwinds if you’re trying to buy a home and you’re self-employed in any capacity. You are inevitably going to be held to a higher financial standard, so prepare yourself for that.  You should aim to get your credit score up to at least 740, and the higher, the better.

Start working toward paying off debt, including your credit cards. Credit utilization is a big component of your score and also the willingness of a lender to offer you a mortgage. Try to have the amount of credit you’re using below 30%.

Before you ever start trying to apply for a home loan, look at your credit report.  This will allow you to see where you need to make improvements, and also spot any potential errors. There are errors on credit reports more often than we think.

Don’t open any new accounts or lines of credit before you’re going to start applying for home loans, because that’s going to impact your credit score negatively.

Finally, before you start the mortgage application process, separate your business and personal bank accounts. You shouldn’t use a personal bank account for anything related to your business.  As a freelancer, getting a mortgage is certainly possible but also more challenging. The more you can prepare yourself for that, the better off you’re likely to be in the process.

Buying a house is one of the biggest things you might do in your life.

The final step in the process is typically the closing. Once you reach this point, it can be a relief because you’re through the arduous underwriting process, but what should you expect when you’re closing on a house?

The closing date is usually decided during the contract negotiation. It’ll be listed on your purchase agreement. A seller accepts your offer, the earnest money is paid, and then, at some point you’ll have your closing.

A closing date can be weeks or months after the formal acceptance of your offer, depending on how much time is needed to complete the deal. Being prepared can speed up the process.

Go Over Your Closing Contingencies

If you have a good team on your side, the closing process should go pretty smoothly.

You will need to make sure all the closing contingencies are completed.

These often include the home inspection and appraisal, the completion of your loan documents, and the purchasing of homeowners’ insurance.

The final walkthrough is usually scheduled 24 hours before closing. This is not the same thing as an inspection. Your agent should schedule your final walkthrough. During this time, the seller should have removed all their belongings.

The condition of the home should match what you agreed on—otherwise, let your agent know.

Common Problems That Delay Closings

As was touched on, to get to a closing date can take weeks or even months. Knowing what some of the most common hurdles are can help you avoid them. Some of the things that often delay the closing date include:

• Appraisal problems
• Loan issues—preapproval can help you avoid this
• Problems with the home inspection
• Issues that arise during the walkthrough
• Problems with the paperwork

Closing Costs

Once you make it to your closing date, there are closing costs. These are fees charged by third parties before the purchase of your new home can be finalized.

Closing costs tend to include appraisal fees, attorney expenses, and your premium for your homeowners’ insurance.

Overall, the closing fees usually come out to anywhere from 3 to 4% of the purchase price of your new home.

Your lender should send you a Closing Disclosure at least three business days before your closing date. This will tell you all the terms and costs, as well as who pays what and to whom it’s paid. Go over these costs carefully and make sure they match what you received in your Loan Estimate.

What Happens on the Day?

Once you arrive at your actual closing day, you’ll need to bring your photo ID, any paperwork or documents that are still needed for the mortgage loan officer or title company, and a certified or cashier’s check. The check needs to be made payable to the title or closing company. The check is for any closing costs that aren’t deducted from the sales price.

On closing day, you’ll pay any remaining closing costs that you should already be aware of based on your review of your Closing Disclosure.

The seller signs documents transferring ownership of the property.

You will sign a few things, including a settlement statement that outlines all the costs related to the sale, a mortgage note saying you promise to repay the loan, and a mortgage or deed of trust. Then, a title company registers the deed in your name.

Once you close on your new home, you may be able to move in as soon as the paperwork is completed unless the seller has asked for different terms, but those will already be in your contract.

When you have a mortgage, there’s a deduction you can take on your taxes for the interest you pay on your first $1 million of debt. If you’re a homeowner who bought your home after December 15, 2017, you can deduct interest on the first $750,000 of your mortgage. If you are going to claim a mortgage interest deduction, you have to itemize your tax return.

The following is a guide to what to know about the mortgage interest deduction and how it works.

The Basics

The mortgage interest deduction lets you reduce taxable income by the amount you pay on the interest of your mortgage during the year. If you have a mortgage and keep up your records, you can lower your tax bill. Generally, as mentioned, you can deduct the interest paid on the initial $1 million of your mortgage for a primary or second home. For buyers who purchased after December 15, 2017, you can deduct what you paid on the first $750,000.

What Qualifies?

If you’re deducting mortgage interest for your primary home, typically, the following will count:

•  Your property can be a mobile home, house, apartment, condo, co-op, house trailer, or even a houseboat
•  Your home has to be the loan’s collateral.
•  The home needs to have sleeping, toilet, and cooking facilities.
•  If you get a housing allowance from the military or through the ministry that’s not taxable, you can still deduct the interest for a mortgage.
•  A mortgage you get to buy out the other half of your home in a divorce also counts.

If you have a mortgage on a second home, the following will qualify you:

•  You don’t need to use the home throughout the year
•  The house has to be the loan’s collateral
•  If you rent out your second home, you need to be there for the longer of at least 14 days or over 10% of the number of days you rented it out

Points are prepaid interest you can get on a loan. You can deduct your points gradually through the life of your loan, or if you meet certain requirements, you can deduct them at the same time. The eight requirements you have to meet to deduct your points all at once include:

•  The mortgage has to be for your primary home
•  It’s an established practice to pay points in your area
•  Your points can’t be abnormally high
•  Your points aren’t for closing costs
•  The down payment you make is higher than your points
•  The points are calculated as a percentage of your loan
•  The points are on your settlement statement
•  You use a cash method of accounting on your taxes

If you have a late payment charge that wasn’t for a specific service done in relation to your mortgage loan, you can deduct that. If you pay your mortgage early, you might have a prepayment penalty. You can deduct that penalty as interest.

You can deduct the interest if you have a home equity loan and use it to buy, substantially improve, or build a home. If you use the money for something not related to your home, it’s not deductible.

What’s Not Deductible?

Finally, the things that aren’t deductible include extra principal payments you make on your mortgage, homeowners’ insurance, title insurance, and settlement costs for the most part. Down payments, earnest money, or deposits you forfeit aren’t deductible or interest on a reverse mortgage.

To claim a mortgage interest deduction, start by looking for your Form 1098, which your lender sends in January or the start of February. Form 1098 outlines how much you paid in interest and points during the year. Your lender will send a copy to the IRS as well. If you paid at least $600 in mortgage interest, which includes points, you’d get a 1098.

You’ll need to itemize your taxes rather than taking the standard deduction when you complete your taxes.

When you itemize your taxes, it can take some more time, but if your standard deduction is lower than available itemized deductions, you should do it to save money anyway. You can use Schedule A to calculate deductions, and tax software will take you through the steps.

There are tax implications of making home improvements, but only in specific situations. When it comes to your taxes, a home improvement might include any work done that increases the value of your home substantially, improves the useful life of the property, or creates new uses.

We’ll get more into what that means specifically below.

Home Improvements vs. Repairs

First, the money you spend on your home in terms of taxes can be divided into improvements and repairs.

The cost of capital improvements can be added to your tax basis in your house. Tax basis is what’s subtracted from the sales price to figure out how much your profit is. With that in mind, you can only take advantage of this if you’re selling your home.

A capital improvement in this context is what was mentioned above—anything that adds value, adapts a home to new uses, or prolongs its life. Something that you could include as a capital improvement might be a new roof or central air-conditioning.

Capital improvements don’t have to be big purchases either—something like storm windows counts or a home security system.

Repairs can’t be added to your basis. Repairs might include painting your home or fixing your gutters.

If you make improvements to your home, make sure you keep records of everything so you’ll have them if you do sell.

Tax Deductions for a Home Office

One way you could save on your taxes and improve your home at the same time is to build a home office. You get a small deduction on improvements you make to your home if you’re using one of the rooms exclusively as your work area, which many people are doing now.

Any repairs benefiting your home can also be deducted, based on the percentage amount of your home used as an office.

Similarly, if you rent out a part of your home, you might be able to deduct what you make in improvements to that area. If you were to, just to give you an example, add a bathroom to the area of your home you rent, you might be able to write that off in its entirety.

Medical Modifications

If a health care provider suggests modifications to your home to help you or to allow you to provide care for your family member, such as an aging parent, the expenses of these updates may be deductible. Examples include adding a wheelchair ramp or modifying your doorways. If the improvement adds value to your home, on the other hand, it’s not deductible.

Upgraded Energy Systems

The IRS has residential energy-efficient property credits. Qualifying properties according to their guidelines updated in April 2021 include solar electric, solar water heaters, fuel cell property and small wind turbines. Also included are geothermal heat pumps.

Improvements qualifying for a residential energy property credit include adding energy-efficient exterior windows and doors and skylights and roofs that are metal or asphalt. Insulation updates are included, and so are upgrades to heating and air systems to make them energy-efficient.

There are some ways to save on your taxes by upgrading your home, but limitations also exist. If you’re unsure of anything, it’s best to talk to a tax professional because guidelines can change from year to year.

Here is a link to my "January Real Estate Update"

This Newsletter is full of interesting and useful information that you will enjoy whether you are a buyer, seller, or homeowner.

This month's issue includes topics such as:
How to Destress Downsizing
Should You Buy a Home Warranty?
Decorating Tricks for Hiding Kids’ Messes While Selling Your Home
When You Want To Renovate Everything, How Do You Choose What To Do First?

Plus, a roundup of December real estate activity as well as much more advice and information.

I hope you enjoy this monthly newsletter. If you have any comments, please e-mail them to me. Or, if you would like to see a certain topic covered in future months, let me know that too!

Here is a link to my "December Real Estate Update"

This Newsletter is full of interesting and useful information that you will enjoy whether you are a buyer, seller, or homeowner.

This month's issue includes topics such as:

• Why Are People Obsessed with Mid-Century Modern Design?
• What Are Escrow Items in a Home Loan?
• How Do You Challenge An Appraisal?
• What Exactly Is ‘Private’ Lending?

Plus, a roundup of August real estate activity as well as much more advice and information.

I hope you enjoy this monthly newsletter. If you have any comments, please e-mail them to me. Or, if you would like to see a certain topic covered in future months, let me know that too!