Buying a House: Every Homeowner Tax Deduction Explained

Buying a home unlocks several tax deductions that renters cannot access. The mortgage interest deduction, property tax deduction under the SALT cap, points deduction, and home office deduction can reduce your taxable income by tens of thousands of dollars per year. The key question is whether your total itemized deductions exceed the standard deduction — because if they do not, these homeowner benefits provide no additional tax savings.

Data Notice: Deduction limits and eligibility rules in “Buying a House: Every Homeowner Tax Deduction” are projected 2026 figures based on IRS guidance and current tax law. Thresholds are inflation-adjusted annually. Verify with IRS.gov and consult a tax professional for your specific situation. [buying-house-tax-deductions]

This guide covers every tax deduction available to homeowners in 2026, including changes under the One Big Beautiful Bill.

The Itemizing Threshold: Standard Deduction vs. Homeowner Deductions

Homeowner tax deductions only provide a benefit if you itemize on Schedule A instead of taking the standard deduction. For 2026:

Filing Status	Standard Deduction
Single	~$16,100
Married Filing Jointly	~$32,200
Head of Household	~$24,150

You should itemize only when your total Schedule A deductions — mortgage interest, SALT, charitable contributions, and medical expenses — exceed these thresholds.

Example: A married couple paying ~$18,000 in mortgage interest and ~$14,000 in SALT has ~$32,000 in just two deductions, which nearly matches the ~$32,200 MFJ standard deduction. Adding charitable contributions or medical expenses pushes them over the threshold, making itemizing worthwhile.

Review our itemized deductions guide for a complete list of Schedule A deductions.

Mortgage Interest Deduction

The mortgage interest deduction is the largest tax benefit for most homeowners.

Rules for 2026

Feature	Details
Deductible on	Acquisition indebtedness (purchase, build, or substantially improve)
Debt limit (mortgages after 12/15/2017)	$750,000 ($375,000 MFS)
Debt limit (mortgages before 12/15/2017)	$1,000,000 ($500,000 MFS)
Applies to	Primary residence + one second home
Home equity loan interest	Deductible only if used to buy, build, or substantially improve the home
Reported on	Form 1098 from your lender

How Much You Save

The tax savings from mortgage interest depend on your marginal tax rate. See the tax brackets guide for 2026 rates.

Mortgage Interest Paid	Tax Bracket	Federal Tax Savings
~$15,000	22%	~$3,300
~$15,000	24%	~$3,600
~$20,000	32%	~$6,400
~$25,000	35%	~$8,750

Year One: Interest-Heavy Payments

In the early years of a mortgage, nearly all of each payment goes toward interest. A new homeowner with a $400,000 mortgage at 6.5% pays approximately ~$25,800 in interest in the first year, declining each year as principal is paid down.

Property Tax Deduction (SALT Cap)

Property taxes are deductible as part of the State and Local Tax (SALT) deduction on Schedule A.

The SALT Cap in 2026

The OBBB raised the SALT cap from $10,000 to ~$40,000 for most filers. This is a combined limit covering:

State and local income taxes (or sales taxes, if elected)
Property taxes

Filing Status	SALT Cap (2026)
Single	~$40,000
Married Filing Jointly	~$40,000
Married Filing Separately	~$20,000
Phase-down	Begins at ~$400,000 AGI (MFJ); reduces to $10,000 above ~$500,000

For full details on the new cap, phase-downs, and state-by-state impact, see our SALT deduction guide.

Impact for Homeowners

Scenario	Property Tax	State Income Tax	Total SALT	Deductible (2026)
Moderate-cost area, moderate income	~$5,000	~$6,000	~$11,000	~$11,000 (full)
High-cost area, high income	~$15,000	~$20,000	~$35,000	~$35,000 (full)
Very high-cost area, very high income	~$25,000	~$30,000	~$55,000	~$40,000 (capped)

The ~$40,000 SALT cap is a significant improvement over the prior $10,000 cap, especially for homeowners in high-tax states like New York, New Jersey, California, and Connecticut.

Points Deduction

When you take out a mortgage, you may pay “points” (also called loan origination fees) to lower your interest rate. Each point equals 1% of the loan amount.

Deduction Rules

Scenario	Deduction Method
Points on a purchase mortgage	Fully deductible in the year paid
Points on a refinance	Deducted ratably over the life of the loan
Points paid by the seller	Deductible by the buyer

Example: You buy a home with a $400,000 mortgage and pay 1.5 points (~$6,000). You can deduct the full $6,000 in the year of purchase, on top of the mortgage interest deduction.

Requirements for Full Deduction in Year One

The loan must be secured by your primary residence
Paying points must be an established practice in your area
The points must not exceed the amount generally charged
You must use the cash method of accounting
The points must be clearly itemized on the settlement statement (Closing Disclosure)

Private Mortgage Insurance (PMI)

If you put less than 20% down on a conventional loan, your lender requires PMI. PMI premiums have historically been deductible, but this deduction has expired and been extended repeatedly.

2026 Status

As of the OBBB legislation, the PMI deduction is not currently extended for 2026. Monitor legislative updates, as Congress has retroactively reinstated this deduction multiple times in the past. If extended, the deduction phases out for AGI above ~$100,000 and disappears entirely above ~$109,000.

Home Office Deduction

If you use a portion of your home exclusively and regularly for business, you may qualify for the home office deduction — but only if you are self-employed or an independent contractor.

W-2 employees cannot claim the home office deduction, even if they work from home full-time. This restriction has been in place since the TCJA eliminated the unreimbursed employee expense deduction in 2018, and the OBBB did not change it.

Two Methods

Method	How It Works	Maximum
Simplified	$5 per square foot of office space	$1,500 (300 sq ft max)
Regular	Actual expenses (mortgage interest, utilities, insurance, repairs) prorated by office %	No fixed cap

Self-employed homeowners can deduct the home office on Schedule C. See our self-employment tax guide for more deductions available to freelancers and business owners.

Energy Efficiency Credits

Homeowners can claim credits for energy-efficient improvements under the Inflation Reduction Act provisions that remain in effect:

Improvement	Credit	Annual Limit
Heat pumps, heat pump water heaters, biomass stoves	30% of cost	~$2,000 per year
Insulation, windows, doors, central AC	30% of cost	~$1,200 per year (combined)
Electric panel upgrade	30% of cost	~$600
Home energy audit	30% of cost	~$150
Residential solar panels	30% of cost	No cap
Battery storage (13+ kWh)	30% of cost	No cap

These are non-refundable credits that directly reduce your tax bill.

Closing Costs: What Is and Is Not Deductible

Closing Cost	Deductible?
Mortgage interest (from closing to first payment)	Yes — reported on Form 1098 or Closing Disclosure
Points / loan origination fees	Yes — see above
Property taxes (prorated at closing)	Yes — as part of SALT
Title insurance	No
Appraisal fee	No
Home inspection	No
Recording fees	No (but added to cost basis)
Transfer taxes	No (but added to cost basis)
Attorney fees	No

Non-deductible closing costs that are added to your cost basis reduce your taxable gain when you eventually sell the home.

Capital Gains Exclusion When You Sell

While this is a benefit you will claim when selling, not buying, it is worth knowing from day one: when you sell your primary residence, you can exclude up to $250,000 in capital gains (Single) or $500,000 (MFJ) if you have owned and lived in the home for at least 2 of the past 5 years.

This exclusion means most homeowners pay zero federal tax on the profit from selling their home. Review the full tax deductions list for additional benefits.

Frequently Asked Questions

Is my mortgage payment tax-deductible? Only the interest portion, not the principal. Your lender reports deductible interest on Form 1098 each January.

Can I deduct property taxes if I take the standard deduction? No. Property taxes are only deductible if you itemize on Schedule A.

What if I rent out part of my home? You can deduct expenses related to the rented portion (mortgage interest, property tax, insurance, repairs, depreciation) on Schedule E, separate from your personal deductions.

Does the $750,000 mortgage limit apply per person or per return? Per return. A married couple filing jointly shares one $750,000 limit. Two unmarried co-owners each get $375,000.

Are HOA fees tax-deductible? Not for your personal residence. HOA fees on a rental property are deductible as a rental expense.

Key Takeaways

Homeowner deductions only help if your total itemized deductions exceed the standard deduction (~$32,200 MFJ, ~$16,100 Single)
Mortgage interest is deductible on up to $750,000 of acquisition debt
The SALT cap rose to ~$40,000 in 2026 under the OBBB, benefiting homeowners in high-tax states
Points on a purchase mortgage are fully deductible in the year paid
The home office deduction is available only to self-employed individuals, not W-2 employees
Energy efficiency credits offer 30% back on qualifying improvements with no income limit

Next Steps

Determine whether to itemize with the standard deduction guide
Understand the new SALT rules in our SALT deduction $40,000 guide
See all available write-offs in the complete tax deductions list
Check the 2026 filing deadlines for your first return as a homeowner

Tax information in this article on buying a house: every homeowner tax deduction is for educational purposes only and does not constitute tax, legal, or financial advice. Tax laws change, and individual circumstances vary. Consult a qualified tax professional or CPA for guidance specific to your situation.