While you own it: the yearly write-offs
These generally apply only if you itemize (rather than take the standard deduction). Whether itemizing beats the standard deduction depends on your total picture, that is the CPA conversation.
Mortgage interest
Interest on the loan used to buy or improve your primary home is typically deductible, up to a federal limit on the loan balance. Your lender sends Form 1098 with the number. This is a deduction (it lowers taxable income), not a dollar-for-dollar credit.
Property taxes
State and local taxes, including your property tax, are deductible if you itemize, subject to the current SALT cap. That cap has moved with recent law, so confirm this year's limit with your CPA before you count on it.
Points paid
Points (prepaid interest) paid to get your mortgage can often be deducted, sometimes all at once on a purchase, sometimes spread over the life of the loan on a refinance. Keep the closing statement.
Energy upgrades
Solar, efficient HVAC, windows, and similar upgrades have carried federal credits (which cut tax directly). These programs change often. Verify what is active the year you install, and keep every receipt.
Your cost basis, and why it pays you back at sale
Your cost basis is what the home "cost" you for tax purposes: the purchase price, plus qualifying improvements, plus certain closing costs. When you sell, your taxable gain is roughly sale price minus selling costs minus cost basis. Every improvement you can document raises your basis, which lowers the gain you might be taxed on. Good records can be worth thousands.
Raises your basis (track these)
- Additions and remodels (kitchen, bath, room adds)
- New roof, HVAC, water heater, windows, flooring
- Landscaping and hardscape, solar, pool, new systems
- Permits and the qualifying closing costs from purchase
Usually does not (but still log it)
- Routine repairs and maintenance
- Painting a room, fixing a leak, service calls
- Anything you got a separate tax credit for
- Log them anyway, for warranties and for your buyer
This is exactly what The House File is for. One row per project, one folder for the receipt, and at sale you hand your CPA a documented basis instead of guessing. Grab the free tracker →
When you sell: the capital-gains home-sale exclusion
This is the big one, and it is stable, long-standing law.
Of gain can be excluded from federal tax if you are single, and you owned and lived in the home as your primary residence for at least 2 of the last 5 years.
Of gain excluded for married filing jointly, same 2-of-5-year primary-residence test. In many Santa Clarita sales, this wipes out the tax entirely.
Your selling costs (agent fee, escrow, title, some concessions) come off the gain too. And a higher documented basis shrinks it further. This is where your records pay off.
Gain above the exclusion, or a home that was not your primary residence long enough, can be taxable. That is precisely the situation where a well-kept basis record saves the most. Talk to your CPA before you sell, not after.
Not tax advice. This is a plain-English overview to help you keep good records and ask better questions. Connor is a Realtor, not a CPA or tax attorney. Federal and California tax rules change, and your situation is unique, confirm everything with a licensed tax professional. Connor is glad to point you to one.
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