New homeowners often expect a much bigger tax refund the first spring after they buy. Sometimes that happens; often it does not. Because some people borrow against an expected refund with a refund advance or similar product, it is worth understanding what really drives the refund before counting on it.
Your refund is a result, not a bonus
A refund is simply the difference between the tax withheld or prepaid during the year and the tax you actually owe. Buying a house only changes the refund if it lowers the tax you owe, and that only happens if your itemized deductions end up larger than your standard deduction.
For the 2025 tax year the standard deduction is $15,750 for single filers, $31,500 for married couples filing jointly and $23,625 for heads of household. Mortgage interest and property taxes are itemized deductions. If your interest, property and other state and local taxes, and charitable gifts together do not exceed your standard deduction, owning the home does not change your refund at all.
The pieces that matter
- Mortgage interest (Form 1098). Your lender reports the interest you paid during the year. If you bought late in the year you may have paid only a few months of interest, so the first-year deduction can be small.
- Property taxes. Only taxes actually paid during the calendar year count, and they are part of the state and local tax (SALT) deduction, which for 2025 the site's figures put at a $40,000 cap, with lower limits for higher incomes.
- Points and closing costs. Some points paid on a purchase mortgage may be deductible; most other closing costs are not deductible but may be added to the home's cost basis. IRS Publication 936 and Publication 530 explain the details.
Why the first-year refund can disappoint
Several common situations produce a smaller-than-expected refund:
- The purchase happened late in the year, so little interest was paid.
- The household's itemized total is close to, or below, the standard deduction.
- The seller paid part of the year's property tax, which is reflected on the closing statement rather than as a tax you paid.
- Withholding changed during the year, for example after a job change, so less tax was prepaid.
Borrowing against an expected refund
Refund advances and refund anticipation loans are repaid out of your refund. If the refund turns out smaller than expected, is delayed for review, or is reduced to pay certain past-due debts, the amount available may be less than you planned for. Before taking any product tied to your refund, read how it handles a smaller refund, what fees or required paid preparation are involved, and when the money is actually available. Our articles on how refund advance loans work and their fees and risks go through the questions to ask.
Consider adjusting withholding instead
If owning a home means you will itemize every year, you may be having more tax withheld than you need. The IRS Tax Withholding Estimator on IRS.gov can help you decide whether to submit a new Form W-4 to your employer. Lower withholding means more money in each paycheck and a smaller refund, which can reduce the temptation to borrow against a refund in the first place. The reverse is also true: if you expect to owe, increasing withholding avoids a bill in April.
Records to keep
Keep your closing disclosure, every Form 1098, property tax receipts and records of home improvements. They support your deductions now and your cost basis if you sell later.
This article is general information for the 2025 tax year. For your own return, use IRS publications or a qualified tax professional.
Related articles
- How Tax Refund Advance Loans Work in 2026
- Fees and Risks of Tax Refund Anticipation Loans
- Tax Refund Timeline 2026
Informational only. TaxCash4Refund is not a lender, broker or tax preparer, and is not affiliated with or endorsed by the IRS. Figures quoted are 2025 tax-year values. This article is not tax, legal or financial advice; check IRS.gov or a qualified professional for your situation. See our disclaimer.