Buying a home in Las Vegas unlocks several IRS-sanctioned deductions that reduce your taxable income starting in the year you close. The mortgage interest deduction alone saves the average homeowner $2,500-$3,500 annually in the early loan years, according to the IRS Statistics of Income Division. Understanding which costs are deductible – and which are not – is the fastest way to lower your first tax bill as a homeowner.
Key Takeaways
- Mortgage interest on loans up to $750,000 is fully deductible if you itemize (IRS Publication 936)
- State and local taxes (SALT) including property taxes are deductible up to $10,000 per year
- Mortgage points paid at closing are deductible in the year of purchase for primary residences
- Nevada has no state income tax, which means more federal deduction value for Las Vegas buyers
- The Energy Efficient Home Improvement Credit covers up to 30% of qualifying upgrade costs, capped at $3,200 annually
Mortgage Interest Deduction: Your Largest First-Year Tax Break
For most new buyers, mortgage interest is the single biggest deduction available. The IRS allows you to deduct all interest paid on mortgage debt up to $750,000 for loans originated after December 15, 2017 (the limit is $1,000,000 for loans originated before that date). On a $450,000 Las Vegas home with 10% down at a 6.8% rate, you would pay roughly $27,000 in interest in year one – all of it deductible if you itemize.
Your lender mails Form 1098 each January showing the exact interest paid. This figure goes on Schedule A of your federal return. The deduction phases out gradually as your principal balance drops because standard amortization front-loads interest in the early years.
Citation: IRS Publication 936 (2025) states that qualified home mortgage interest is deductible on a primary or second home, subject to the $750,000 debt limit for loans taken out after December 15, 2017. Borrowers who refinanced before that date retain the higher $1 million cap. The IRS recommends keeping Form 1098 and your closing disclosure for at least three years after filing.
Property Tax Deduction: Capped but Still Valuable
Nevada’s property tax rate is among the lowest in the West, averaging 0.53% of assessed value according to ATTOM Data Solutions. On a $500,000 Las Vegas home, that works out to roughly $2,650 per year – well under the $10,000 SALT cap. Unlike high-tax states where buyers often hit the cap immediately, most Las Vegas buyers can deduct 100% of their property taxes paid. Read more in our related guide: real estate tax deductions.
Property taxes paid at closing (the seller’s prorated share that you reimburse) are also deductible in the year of purchase. Check your closing disclosure: Line K.1 shows prepaid property taxes you paid at settlement.
What qualifies: Real estate taxes assessed uniformly against all property in a jurisdiction. What does not qualify: Special assessments for local improvements like sidewalks or sewers, HOA fees, or transfer taxes.
See our closing cost breakdown for 2026 for a full list of what appears on your closing disclosure and which items are deductible.
Mortgage Points: Deduct the Full Amount in Year One
If you paid points to buy down your interest rate at closing, you can deduct the entire amount in the year of purchase – provided the loan is for your primary residence and the points are a percentage of the loan amount. Each point equals 1% of the loan. On a $400,000 mortgage, one point costs $4,000 and is fully deductible on Schedule A.
This deduction is particularly powerful for Las Vegas buyers using mortgage points to lower their rate in a higher-rate environment. Unlike a refinance (where points must be deducted over the loan term), purchase points on a primary home qualify for immediate deduction. Explore further in our homebuyer tax benefits 2026. For more on this topic, see our nevada property laws.
Citation: IRS Publication 530 (2025 edition) confirms that points paid on a mortgage to purchase a principal residence are generally fully deductible in the year paid, as long as they represent prepaid interest and the loan is secured by the home being purchased. Refinance points must be deducted ratably over the loan term.
Energy Efficient Home Improvement Credit: Up to $3,200 Per Year
The Inflation Reduction Act extended and expanded this credit through 2032. Buyers who make qualifying improvements in the year of purchase – or any subsequent year – can claim:
| Improvement | Credit Rate | Annual Cap |
|---|---|---|
| Insulation, air sealing | 30% | $1,200 total cap |
| Exterior windows/skylights | 30% | $600 |
| Exterior doors | 30% | $250 per door / $500 total |
| Heat pumps, heat pump water heaters | 30% | $2,000 |
| Home energy audits | 30% | $150 |
Unlike deductions (which reduce taxable income), tax credits reduce your tax bill dollar-for-dollar. A $2,000 heat pump credit saves you $2,000 in taxes. The annual $3,200 maximum resets each year, meaning buyers can spread improvements across multiple tax years.
Source: IRS Form 5695 Instructions and the Inflation Reduction Act of 2022.
Prepaid Interest at Closing: A Deduction Many Buyers Miss
When you close mid-month, your lender collects “per diem interest” – the interest owed from your closing date through the end of that month. This appears on your closing disclosure as a prepaid item but is fully deductible as mortgage interest in the year you close, even though your first full payment may not be due until two months later.
Example: Close on December 10 and you pay 21 days of per diem interest. That amount is deductible on your December 31 tax return alongside any other mortgage interest paid that year. It may seem small, but on a $450,000 loan at 6.8%, that’s roughly $1,750 in deductible interest you would not want to miss.
Review our initial escrow payment guide for a full breakdown of prepaid items at closing.
What Is NOT Deductible: Avoid These Mistakes
Many buyers assume all closing costs are deductible. They are not. The following are explicitly non-deductible:
- Title insurance premiums
- Home inspection fees
- Appraisal fees
- Transfer taxes and recording fees
- HOA fees (for primary residences)
- Homeowner’s insurance premiums
- Moving expenses (eliminated federally since 2018, except for military)
These non-deductible costs do add to your home’s “adjusted cost basis,” which reduces taxable capital gains if you sell later. Keep all records from closing – even for non-deductible items.
See our hidden costs guide for home buyers for a complete list of what to expect at settlement.
Standard Deduction vs. Itemizing: Which Is Right for You?
The 2026 standard deduction is $15,000 for single filers and $30,000 for married filing jointly (indexed for inflation from the 2017 Tax Cuts and Jobs Act baseline). You only benefit from mortgage interest and property tax deductions if your total itemized deductions exceed the standard deduction.
For most Las Vegas buyers in 2026:
- Under $400,000 loan: Standard deduction often wins in later loan years when interest drops
- $400,000-$750,000 loan: Itemizing typically beats the standard deduction in years 1-10
- Above $750,000: Itemizing almost always wins, though interest above the cap is not deductible
A tax professional can run both scenarios. The IRS Interactive Tax Assistant offers a free online tool to estimate which approach saves more.
Citation: The National Association of Realtors 2025 Profile of Home Buyers and Sellers notes that 34% of recent buyers cited tax benefits as a significant factor in their purchase decision. For buyers with mortgages above $300,000, itemizing typically produces $2,000-$8,000 more in savings than taking the standard deduction in the first five loan years.
Nevada-Specific Tax Advantage for Las Vegas Buyers
Nevada has no state income tax. This matters because it affects your SALT deduction calculation. High-tax-state buyers often hit the $10,000 SALT cap immediately with state income taxes alone, leaving little room for property tax deductions. Nevada buyers have no state income tax to count against that cap – meaning the full $10,000 is available for property taxes and any local taxes, maximizing your federal deduction.
This is one of many financial advantages covered in our Nevada no income tax guide. For buyers comparing financing options, understanding the full cost picture – including tax benefits – is essential. Our down payment assistance programs guide and closing cost calculator can help you model total year-one costs.
Recordkeeping: What to Save and For How Long
The IRS recommends keeping home-related tax records for as long as you own the property plus three years after filing the return for the year you sell. At minimum, retain:
- Closing disclosure (HUD-1 or CD)
- Form 1098 from your lender each year
- Property tax bills and payment receipts
- Receipts for energy-efficient improvements (with manufacturer certifications)
- Any mortgage points documentation
Digital backups are acceptable. A single organized folder – physical or cloud-based – prevents scrambling during audits or at resale when calculating your adjusted cost basis.
Frequently Asked Questions
Can I deduct mortgage interest if I took a down payment assistance loan?
Yes, if the DPA loan is secured by your home and you are legally liable for the debt, the interest qualifies for the mortgage interest deduction. Forgivable second liens (common in programs like CBC Chenoa Fund) may have different tax treatment – consult a CPA. For more on this topic, see our roth ira first time home buyer.
What if I use part of my home as an office?
A qualifying home office creates additional deductions (a portion of mortgage interest, utilities, and depreciation), but it must be used exclusively and regularly for business. This deduction is only available to self-employed individuals; employees who work from home cannot claim it under current law.
Are FHA mortgage insurance premiums (MIP) deductible?
The MIP deduction expired after 2021 and has not been permanently extended as of 2026. Check IRS.gov for any retroactive extensions passed by Congress.
Do I need to itemize to claim the energy credit?
No. The Energy Efficient Home Improvement Credit (Form 5695) is a non-refundable credit taken directly against your tax liability regardless of whether you itemize or take the standard deduction.
Can I deduct homeowner’s association fees?
No. HOA fees on a primary residence are not deductible. They may be partially deductible if the property is a rental or if a portion is attributable to a home office.
