You don’t buy a home for tax deductions. This is just a nice side benefit – and usually much appreciated considering all the extra costs associated with owning a home.
Here are eight tax breaks for homeowners you should know about, updated for the 2026 tax year and reflecting changes from the Big Beautiful Bill. Remember, these instructions apply to the 2026 tax year, which you will file in 2027.
The most well-known tax break is most likely the mortgage interest deduction. It can be understood at least. There are two key points to know about claiming this deduction:
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You must file a tax return.
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The annual loan amount on the entire mortgage loan is $750,000.
Private mortgage insurance (PMI) payments will be allowed as deductible mortgage interest in 2026 (but not for 2025 returns).
You’ll still need to consider whether taking the income tax deduction for mortgage interest — along with other deductions — exceeds the standard deduction. To deduct any special expenses related to your home, you should opt for itemized deductions.
Read more: Standard Deduction vs. Itemization: Which Tax Filing Method Is Best for You?
However, fewer homeowners are expected to pay taxes in 2026 due to higher standard deduction amounts:
Taxpayers over 65 have new deductions through the 2028 tax year: an additional $6,000 for single filers; $12,000 for a married couple. The deduction applies to income over $75,000 ($150,000 for joint filers).
“If (homeowners) have a medical event and are in the hospital for three or four months. Or they’ve made a significant donation — all of those things fall into the same categories. Mortgage interest is part of it,” John G. Adams, a CPA in Jupiter, Fla., told Yahoo Finance in a phone call.
Home equity loans and lines of credit can be valuable tools to turn a piece of unsecured property (your home) into cash. And they can provide another tax break.
While the guidelines were initially relaxed, the OBBB insists that for HELs and HELOCs that are tax-deductible in 2026, the money must still be used to buy or improve your home. There are other limitations as well. An important consideration: Interest deductions are allowed on up to $750,000 of home equity debt, including first and second mortgages. If you’re married and filing your taxes separately, it drops to $375,000.
This is another tax break that you have to pay to get.
Dig deeper: Is interest on a HELOC tax deductible?
Mortgage discount points lower your mortgage interest rate – and discount points can be tax deductible (if you file your tax return).
By paying some interest up front, you pay less interest over the remaining years of your mortgage, Adams said. Typically, for every 1% discount point, your mortgage rate is reduced by a quarter point. For example, on a $400,000 mortgage, you might pay $4,000 to lower your rate from 7% to 6.75%. Points can also be redeemed in installments.
“Just remember that the words aren’t financially prudent unless you plan on living in your home for at least five years before selling, and most homeowners are moving before that,” Crystal Stranger, a listing agent and tax educator in Boulder, Colo., told Yahoo Finance.
Property taxes—in the jurisdictions where they’re collected—fund many services and infrastructure where you live. And they can be income tax deductible along with other state and local taxes.
The SALT (state and local tax deduction) has been increased to $40,000 from the previous $10,000 limit.
“This is great news for homeowners who pay high property taxes, like in New York or Texas,” Stranger said. “However, it is reduced for taxpayers who earn more than $500,000. Income over this amount actually loses more than a dollar in credits and deductions for every dollar of income.”
As with all of these other tax breaks, you must calculate your tax return and comply with the appropriate limitations.
Now, we cut tax deductions to a thin slice. Homeowners association fees are about as close as you can get to a nuisance fee in a homeowner’s scenario. They are generally not tax deductible.
There are exceptions – but don’t hold your breath. You may write off some or all of your HOA fees on an investment property, a home you occasionally use as a rental, or a home office.
Many people keep their homes for a long time, so renovations and upgrades are popular. However, the tax benefit of such home improvements is often a long-term proposition and not a deduction in next year’s tax refund.
A tax break is not allowed for minor cosmetic touch-ups, maintenance, or repairs; It’s only meant to be updated to increase the market value of your home. Called “capital improvements,” these significant improvements increase your cost basis—the amount you paid for the home. This, in turn, may reduce the capital gains tax you pay when you sell the home.
If tax deductions are the driving factor behind your home remodeling, you may want to contact a tax professional before taking the plunge—this type of tax deduction involves a lot of fine print and red tape.
Working from home can have its benefits. But the tax break? Yes, sometimes.
“If you use your home for business, it opens the door to significant other deductions, including a portion of repairs, utilities, and more,” Stranger noted.
You can calculate the square footage of your workspace or, for careful record keepers, calculate your actual work-related expenses. “You can also take the simple IRS approach, allowing a $5 deduction per square foot of home office space, up to 300 square feet, which means $1,500 in deductions.”
The catch: To get the tax exemption, you’ll generally need to be self-employed, a contracted freelancer, or if you’re an employee, the use of your home for work “must be for the convenience of your employer,” the IRS says. And you will need a dedicated workspace.
learn more: How does the home office deduction work?
The profit on the sale of the house is called capital gain. You can avoid paying real estate capital gains tax on some or all of the money under two conditions:
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Home is your primary residence.
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You have lived at home for at least two of the last five years.
Currently, the IRS allows a homeowner to disallow an initial gain of $250,000 on the sale of a primary residence. This increases to $500,000 for a married couple. For Example:
A married couple filing their taxes jointly sells their home for $750,000. Assuming they paid $500,000 for the house, with the exception of capital gains, they will not pay capital gains taxes.
$750,000 sales price – $500,000 cost basis = $250,000 (- $500,000 exception = $0 capital gain)
“Most homeowners I’ve seen sell their homes within two years, making little or no profit on the sale,” Stranger said. “Capital gains taxes are rarely an issue for homeowners who sell their primary residence.”
Dig deeper: Can you get a tax break for selling your home at a loss?
Crystal Stranger noted that the Energy Efficient Home Improvement Credit (25C) and Residential Clean Energy Credit (25D) for solar panels are not allowed for property placed in service after December 31, 2025.
Note, this applies to 2026 returns filed in 2027.
Considering all the tax benefits, it is worth remembering that you are buying a house for living reasons: your family is growing, you are closer to your job or relatives, or you simply want a place of your own.
You don’t buy a home for tax benefits. Adams said it would be a “tail wagging the dog” type of decision.
He added: “You always have to think strategically – first about your family or your business life, and then finance should be a part of it, but it shouldn’t really be the deciding factor of why you do things.”
learn more: The best tax deductions to claim this year
As mentioned above, many potential deductions include interest you pay on your mortgage loan and, in some cases, interest on HELOCs and HELs. Property, state, and local real estate taxes may also be filed. Prepaid interest, called discount points, may be deductible. And, sometimes, home office expenses and significant home improvements can provide a tax break. However, with higher standard deductions in 2026, fewer homeowners may file.
If you have a home office, you can deduct a portion of your work-related expenses. Or you can take a write-off based on the IRS deduction rate multiplied by the square footage of your dedicated workspace. You can also reduce losses from pests and theft.
New homeowners can pay mortgage interest, discount points, property taxes, major home upgrades, and home office expenses — if they pay the items.
If you have a home office and are not a full-time remote employee, you may deduct a portion of the amount you pay for utilities up to a maximum amount based on the square footage of the workplace.
