This section explains what expenses are deductible as a homeowner. It also points out what expenses are not deductible. There are three primary points for consideration: state and local real estate taxes, sales taxes, and home mortgage interest.

Frequently, your real estate taxes and home mortgage interest are included in your monthly home payment.

Your home payment – Deductible Expenses
If you took out a mortgage (loan) to finance the purchase of your home, you probably must make monthly home payments. Your home payment may include several costs of owning a home. The only costs you can deduct are state and local real estate taxes actually paid to the taxing authority and interest that qualifies as interest. These are discussed below.

Some nondeductible expenses that may be included in your home payment include:

• Fire or homeowner’s insurance premiums,
• Mortgage insurance premiums, and
• The amount applied to reduce the principal of the mortgage.
  
  

Minister’s or military housing allowance.
If you are a minister or a member of the uniformed services and receive a housing allowance that isn’t taxable, we can still deduct your real estate taxes and your home mortgage interest. You don’t have to reduce your deductions by your nontaxable allowance.

Nondeductible payments.
We can’t deduct any of the following items.

• Insurance, including fire and comprehensive coverage, and title insurance.
• The wages you pay for domestic help.
• Depreciation.
• The cost of utilities, such as gas, electricity, or water.
• Most settlement costs.
• Forfeited deposits, down payments, or earnest money.
• Internet or Wi-Fi system or service.
• Homeowners’ association fees, condominium association fees, or common charges.
• Repairs to home.