You don’t purchase a home primarily for the tax benefits. Those deductions can be nice perks, especially when you factor in the various costs that come with owning a home.
Here are eight tax relief tips that every homeowner should keep in mind. These have been updated for the 2026 tax year following changes in the One Big Beautiful Bill. Just a heads-up, these guidelines will apply to tax returns filed in 2027.
Private mortgage insurance (PMI) payments are set to be deductible as mortgage interest in 2026 (but not for returns in 2025).
It’s worth considering whether the mortgage interest deduction, along with other itemized deductions, exceeds the current standard deduction. To claim certain expenses related to your home, you’ll need to opt for itemizing.
However, it seems that fewer homeowners might itemize their taxes in 2026 due to the increased standard deduction.
For taxpayers aged 65 and older, there’s a new deduction that will be available until the end of the 2028 tax year. Single filers can get an additional $6,000, while couples can claim $12,000. However, this benefit starts phasing out for incomes above $75,000 ($150,000 for joint filers).
John G. Adams, a CPA from Florida, mentioned over the phone that if someone faced a significant medical issue or made a sizeable donation, those situations could impact their taxes as well. Mortgage interest would be included in that calculation.
Home equity loans and lines of credit can help turn some of your home’s value into cash, which can be useful.
There are also potential tax advantages associated with them.
While there were initial plans to relax the guidelines, OBBB insists that for HELs and HELOCs to be eligible for tax credits in 2026, the funds must be used for purchasing or improving a home. Additionally, there are specific restrictions. Generally, interest deductions can be claimed on up to $750,000 of mortgage debt, including first and second mortgages, which drops to $375,000 if you’re married and filing separately.
This deduction also requires itemizing on your tax return.
Mortgage discount points, which can reduce your mortgage interest rate, are also tax deductible (if you itemize your tax return).
Adams explained that paying a bit upfront in points can save you money on interest over the life of your mortgage. Each 1% in discount points typically lowers the interest rate by about a quarter of a point. For instance, if you have a $400,000 mortgage, spending $4,000 could reduce your interest rate from 7% to 6.75%. You can buy points in smaller fractions too.
However, Crystal Stranger, a tax educator from Colorado, cautioned that this strategy only makes financial sense if you plan to stay in the home for at least five years; many homeowners move long before then.
Property taxes help fund essential services in your area and could potentially be tax deductible along with other local and state taxes.
The so-called SALT (state and local tax) deduction limit has been raised to $40,000 from the previous $10,000.
Stranger indicated that this is beneficial for homeowners in areas like New York and Texas, where property taxes tend to be high. But for those earning over $500,000, benefits start to dwindle — you could lose more than one dollar in credits or deductions for every dollar you make above that threshold.
As is the case with other tax breaks, you’ll need to itemize and adhere to the respective limits.
Homeowner association fees might seem like a nuisance but don’t generally qualify for deductions.
There are exceptions, though. You might be able to deduct some or all HOA fees if the property is an investment, a temporary rental, or has a home office.
While renovations and upgrades are common, the associated tax benefits are mostly long-term and won’t be deductible on your next year’s return.
It’s important to note that tax deductions aren’t applicable for minor cosmetic changes or usual maintenance; they’re meant for significant improvements that can increase your home’s market value. These major upgrades, termed “capital improvements,” will raise your cost basis, potentially reducing capital gains tax when you eventually sell.
If tax credits are your main motivation for renovating, it’s wise to consult a tax professional first. There’s often a lot of detail and red tape involved.
Working from home also has some perks — and sometimes tax cuts can be one of them.
If you’re using your home for business, there’s a chance you could claim more deductions, including expenses like repairs and utilities, according to Stranger.
You can calculate the square footage of your workspace and even itemize your actual work-related expenses. Also, there’s the IRS’ simplified method, allowing a deduction of $5 per square foot for home office space, up to a maximum of 300 square feet, which totals $1,500.
Keep in mind, though, that to qualify for the tax deduction, you usually need to be self-employed or a contractor. If you’re an employee, working from home must be essential for your employer. Plus, you need to have a dedicated workspace.
When selling your home, the profit is known as a capital gain. You may be able to avoid paying capital gains tax on some or all of that gain if two conditions are met:
- That house was your primary residence.
- You’ve lived there for at least two of the last five years.
Currently, the IRS permits homeowners to exclude the first $250,000 of gain when selling their main residence; for married couples, that figure doubles to $500,000. For example, if a couple sells their home for $750,000, having originally purchased it for $500,000, they won’t incur capital gains taxes. The math looks like this:
Selling price $750,000 – Cost basis $500,000 = $250,000 (-$500,000 exclusion = $0 capital gain)
Stranger commented that most homeowners I’ve seen who have sold within two years either lost a bit or broke even when they sold. Typically, capital gains taxes aren’t a major concern for most home sellers.
Properties put into service after December 31, 2025, won’t be eligible for the Energy Efficient Home Improvement Credit (25C) and the Residential Clean Energy Credit (25D) concerning solar panels, according to Stranger.
Remember, these apply to returns for 2026, filed in 2027.
At the end of the day, it’s crucial to keep in mind that you’re buying a home primarily for lifestyle reasons — whether it’s expanding your family, being closer to work or loved ones, or simply seeking a space to call your own.
Purchasing a house shouldn’t be driven by tax incentives. Adams remarked that letting tax benefits dictate your decision would be akin to the “tail wagging the dog.”
As he emphasized, you should strategically prioritize your family’s needs and work life, with taxes being an important consideration but not the main driving factor behind your choices.
The deductions you might most commonly claim include mortgage interest, potential HELOC or HEL interest, and property, state, or local taxes. Prepaid interest (discount points) could be deductible too. Some may even receive tax breaks for home office expenses or significant home upgrades. That said, considering the higher standard deduction in 2026, fewer homeowners may end up itemizing their taxes.
If you operate a home office, it might be possible to deduct certain work-related expenses. Alternatively, you could use a calculation based on the IRS deduction rate times the square footage of your workspace. Losses from disasters and theft can also be deducted.
By itemizing, new homeowners can write off mortgage interest, discount points, property taxes, significant home upgrades, and home office expenses. If you have a home office but are not fully remote, there’s a possibility to deduct a portion of your utilities based on the space you use for work.
