Tax Season - What you can and can't do
Homeowner Tax Deductions in California: What You Can and Can’t Write Off
Tax season is here, and if you’re a homeowner in California, you may be wondering what expenses you can deduct to maximize your savings. While homeownership offers financial benefits, not all costs are eligible for tax deductions—especially under California’s unique tax laws, which sometimes differ from federal rules. To help you navigate your 2024 tax return, here’s a breakdown of what California homeowners can and can’t write off—plus links to state-specific rebate programs that could help you save even more.
What You Can Deduct in California
1. Mortgage Interest
California homeowners can deduct mortgage interest on their primary or secondary residence, with the following limits:
This deduction applies to traditional mortgages, home equity loans, and HELOCs only if the borrowed funds were used for home improvements.
Tip: If you refinanced your mortgage in 2023 or 2024, you may still qualify for this deduction, depending on the terms of your loan.
2. Property Taxes (With a $10,000 Cap)
California homeowners can deduct state and local taxes (SALT), including property taxes, but with a $10,000 federal cap ($5,000 if married filing separately).
Since California’s property taxes are higher than in many states, homeowners in areas with high home values (such as Los Angeles, the Bay Area, or San Diego) may not be able to deduct the full amount.
3. Home Office Deduction (Self-Employed Only)
If you’re self-employed and use part of your home exclusively for business, you may qualify for the home office deduction, which allows you to write off:
Important: This does not apply to W-2 employees working remotely in California.
4. Energy-Efficient Home Improvements (Federal & California Rebates!)
If you made energy-efficient upgrades in 2024, you may qualify for federal tax credits as well as California rebates and incentives.
Eligible improvements include:
California Rebates You Should Know About:
What You Can’t Deduct in California
1. Homeowners Insurance
Standard homeowners, fire, and earthquake insurance are not tax-deductible in California.
2. HOA Fees
Homeowners Association (HOA) fees are not deductible unless you rent out part of your home, in which case you can write off the portion used for rental purposes.
3. Mello-Roos Taxes (With Some Exceptions)
Many California homeowners pay Mello-Roos taxes (special district taxes for schools, infrastructure, etc.). These taxes are only deductible if they are calculated as part of your general property tax bill. Special assessments and direct fees are not deductible.
4. Closing Costs
Most closing costs—such as escrow fees, title insurance, and agent commissions—are not deductible. However, points paid on a mortgage may be deductible, depending on your situation.
5. Home Renovations & Repairs
Home improvements and repairs are not immediately deductible. However, they may help reduce capital gains tax when you sell by increasing your home’s cost basis.
6. Utility Bills
Electricity, water, gas, and internet are not deductible unless they are part of a home office deduction for self-employed homeowners.
California-Specific Considerations
Capital Gains Tax on Home Sales
If you sell your primary residence in California, you may qualify for capital gains tax exclusions:
To qualify, you must have lived in the home for at least two of the last five years before selling.
California does not conform to all federal tax laws on capital gains, so consult a tax professional before selling.
Owning a home in California comes with tax benefits, but knowing what you can and can’t deduct is key to maximizing your savings. Consult a tax professional for state-specific deductions and capital gains planning. By leveraging the right deductions and planning ahead, you can make the most of your California homeownership tax benefits!
This article is for informational purposes only and should not be considered tax or financial advice. Tax laws change frequently, and deductions may vary based on individual circumstances. Consult a licensed tax professional or CPA for guidance tailored to your situation. Windermere Real Estate assumes no liability for any decisions made based on this information. Thank you Windermere for the information.