Which of the following is generally income tax deductible in home ownership?

• A. HOA dues
• B. Points paid to obtain the loan
• C. Property taxes
• D. Homeowners insurance

Answer: (B)

When you think about what homeownership costs can reduce your federal income tax, prepaid interest paid to obtain a loan is the typical item that most buyers can deduct. Those points are considered a form of mortgage interest that you pay up front to get the loan, so they are generally deductible in the year you pay them, provided the loan is for your primary home and the points meet the IRS rules. If you later refinance, you usually have to amortize the deduction over the life of the new loan rather than taking it all at once.

Other common homeownership costs aren’t treated the same way. HOA dues are not deductible for a personal residence. Property taxes can be deductible if you itemize deductions, but they’re subject to the SALT cap and aren’t guaranteed to provide a deduction in every tax situation. Homeowners insurance isn’t deductible for a personal residence, though it could be deductible in certain contexts like a home office, business use, or rental property.

So, the item that is generally deductible against income taxes in the typical homeownership scenario is the points paid to obtain the loan.