The life of a self-employed homeowner comes with unique opportunities—every receipt holds potential, and your home can be a strategic tool for tax savings. If you’ve ever wondered whether your mortgage could work in your favor at tax time, you’re in the right place. Let’s break down the key mortgage-related tax deductions for self-employed individuals, with practical insights and a few "why didn’t I think of that?" sprinkled along the way.
Mortgage Interest: Your New Best Friend (Maybe)
The IRS isn’t exactly known for its generosity, but it does have a soft spot for mortgage interest. If you’re self-employed and own a home, you might deduct mortgage interest—but there’s a catch. To qualify, the loan must be secured by your primary or secondary home, and the funds must have been used to buy, build, or improve said property. The Tax Cuts and Jobs Act (TCJA) of 2018 caps the deductible mortgage debt at $750k, and could sunset in 2025 unless Congress acts to extend or make the changes permanent.
Property Taxes: The Gift That Keeps on Giving (Sort Of)
Property taxes are another deductible gem—up to $10k combined for state and local taxes (SALT). For self-employed homeowners, this means you can shave a chunk off your taxable income. But beware: if your home office is part of the equation, only the portion tied to your business space counts. Think of it like a pizza—only the slices you use for work are deductible.
The Home Office Deduction: Where Magic Happens
Your home office isn’t just a workspace—it can also be a tax advantage. To qualify for the home office deduction, your workspace must be exclusively and regularly used for business. Measure your square footage carefully, because if your office takes up 10% of your home, you can deduct 10% of mortgage interest, utilities, and even repairs. But business use isn’t limited to a dedicated office—if you host client meetings in your living room or store inventory in your garage, the IRS may allow deductions for those spaces too. Just remember, personal Netflix marathons in your “business lounge” won’t pass an audit. Keep records, snap photos of your setup, and save utility bills—the IRS loves a good paper trail. For details, check out their ultimate guide to home office deductions.
Refinancing: A Double-Edged Sword
Refinancing can lower your monthly payments, but how does it affect deductions? If you refinance to improve your home (like adding solar panels), the interest stays deductible. Cash-out refinancing? Only the portion used for home improvements qualifies. Everything else? Sorry, that’s a no-go.
What to Keep in Your Tax Toolbox
Documentation is your armor in the tax battlefield. Save these like your sanity depends on it:
Form 1098 (mortgage interest statement)
Property tax records
Home office measurements and utility bills
Receipts for home improvements
To supercharge your tax savings, consider bundling deductible expenses in high-income years or strategically timing home improvements. Tools like QuickBooks Solopreneur or TurboTax Expense Monitor can help track expenses, but always call a tax professional.
What’s Your Tax Superpower?
I track every receipt like a hawk!
I outsource it all to a professional
I wing it and hope for the best