While there’s no federal **first-time homebuyer tax credit** currently enacted, first-time homebuyers in 2025 can still take advantage of valuable tax deductions related to **mortgage interest**, **discount points**, and **property taxes** — especially if they plan to itemize deductions.
🏠 Mortgage Interest Deduction
- For mortgages originated after December 15, 2017, you can deduct mortgage interest on up to **$750,000** of acquisition debt ($375,000 if married filing separately). For loans closed before that date, the higher **$1 million** limit still applies. :contentReference[oaicite:0]{index=0}
- You must itemize on **Schedule A** of Form 1040 to claim this deduction. :contentReference[oaicite:1]{index=1}
- This deduction helps lower your taxable income significantly during the early years of your mortgage when interest payments are highest. :contentReference[oaicite:2]{index=2}
📘 Deducting Mortgage Discount Points
- If you paid **discount points** (prepaid interest) on a new mortgage to buy your primary home, you may deduct the full amount in the year paid — provided you meet IRS criteria (e.g., cash accounting, percentage of loan, local practice norms). :contentReference[oaicite:3]{index=3}
- If points exceeded standard practice or you refinanced, you may need to deduct them **pro rata** over the life of the loan. :contentReference[oaicite:4]{index=4}
- Reporting is done on **Schedule A**, and details typically appear on Form 1098. :contentReference[oaicite:5]{index=5}
🧾 Property Tax Deduction
- You can deduct state and local **property taxes**, up to the SALT cap. :contentReference[oaicite:6]{index=6}
- For 2025, the SALT cap is increased to **$40,000** for most filers with AGI ≤ $500,000 (phases out at higher incomes). Married filing separately cap is $20,000. :contentReference[oaicite:7]{index=7}
- Property tax payments may be reported via escrow (Form 1098) or property tax bills. Ensure you only deduct taxes paid during the calendar year. :contentReference[oaicite:8]{index=8}
🔍 First‑Time Homebuyer Specific Considerations
- There is **no federal first-time homebuyer tax credit** in force in 2025. Previous proposals (such as the $15,000 credit) have not become law. :contentReference[oaicite:9]{index=9}
- However, many **state and local programs** offer benefits like Mortgage Credit Certificates (MCCs), which allow a dollar-for‑dollar credit based on a percentage of your mortgage interest paid (often capped at $2,000/year). :contentReference[oaicite:10]{index=10}
- Some states or local housing finance agencies also offer grants, down‑payment assistance, or energy-efficient homebuyer incentives. :contentReference[oaicite:11]{index=11}
📊 Example: Itemizing After First Home Purchase
Amanda and John buy their first home in 2025 and pay the following in year one:
- Mortgage interest: $10,000 (under the acquisition debt limit)
- Paid 2 discount points ($4,000) at closing — eligible to deduct fully in year paid
- Property taxes: $8,500
If they itemize, their deduction tally would be:
Mortgage interest $10,000 + points $4,000 + property taxes $8,500 = $22,500.
This exceeds the standard deduction for married filing jointly ($31,500)? No — so they compare combined deductions, and if other itemized items (charity, SALT, etc.) push them above the standard deduction, itemizing becomes beneficial.
✅ Planning Tips
- First maximize your SALT and other itemized deductions to exceed your standard deduction.
- If eligible, consider paying **discount points** upfront — they may be fully deductible in the first year if IRS criteria are met.
- Check if your state offers **Mortgage Credit Certificates (MCCs)** or homebuyer assistance.
- Maintain documentation: Form 1098, settlement statements, point details, property tax bills.
- Use tax software or work with a tax professional to determine whether itemizing outweighs the standard deduction in year one — especially in states with high property tax or interest. :contentReference[oaicite:12]{index=12}
📝 Summary Table
| Deduction Type | Deductible? | Notes |
|---|---|---|
| Mortgage interest | ✅ Yes | Up to $750K or $1M limit based on origination date |
| Discount points | ✅ Yes | Fully in year paid if criteria met; otherwise amortize |
| Property taxes | ✅ Yes | Within SALT cap—up to $40K for many filers in 2025 |
| Federal first-time credit | ❌ No | Not enacted as of July 25, 2025 |
| MCC or state credit | ✅ Possibly | Depending on local programs |
📌 Final Thoughts
While there’s no active federal first-time homebuyer credit in 2025, new homeowners can still benefit from sizeable deductions like mortgage interest, deductible discount points, and property taxes — especially under the temporarily expanded SALT cap. Be strategic about itemizing in your purchase year, and explore state‑level programs like Mortgage Credit Certificates to maximize your tax savings.
