Do You Get Money Back on Taxes for Buying a House?

Do you get money back on taxes for buying a house? Sometimes, but not automatically. Buying a home lowers your federal tax bill only if your mortgage interest, property taxes, and other qualifying costs add up to more than the standard deduction for your filing status. For the 2026 tax year, that threshold is $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household.¹ Clear that number and itemizing puts money back in your pocket. Fall short and buying the house won’t change your refund at all.

A few 2026 changes tilt the math more favorably than in recent years: a higher cap on state and local tax deductions, and a reinstated deduction for private mortgage insurance.

The Itemize-or-Not Test

Every homeowner deduction lives on Schedule A. You either take the standard deduction or you itemize. You cannot do both.²

To see which side you land on, total these amounts for the year:

Mortgage interest, from the Form 1098 your lender sends you
Property taxes paid to your local tax authority
State income taxes or state sales taxes (pick whichever is larger)
Deductible mortgage points
Private mortgage insurance premiums, if applicable
Any other itemizable expenses, like charitable contributions or qualifying medical costs

If that total tops your standard deduction, itemize. If not, take the standard deduction and accept that this year’s home purchase won’t produce a specific tax benefit. The higher 2026 SALT cap means more homeowners in high-tax states will clear the threshold than during the years the cap sat at $10,000.

Mortgage Interest

You can deduct interest on a loan used to buy, build, or substantially improve your primary or secondary home, as long as the loan is secured by the property. The deduction covers interest on up to $750,000 of mortgage debt, or $375,000 if you’re married filing separately. The One Big Beautiful Bill Act made this limit permanent; it had been scheduled to expire after 2025.³

Only “acquisition indebtedness” qualifies, meaning the money has to have gone toward the home itself. Refinancing keeps the deduction, but only up to the balance of the original loan. Your lender reports the year’s interest on Form 1098.⁴

Property Taxes and the SALT Cap

Property taxes on your home fall under the state and local tax deduction, which also covers either state income taxes or state sales taxes, but not both. Everything sits under one combined cap.⁵

For 2026, the SALT cap is $40,400, a substantial jump from the $10,000 limit that applied from 2018 through 2025. The cap phases down for higher earners: once your modified adjusted gross income exceeds $505,000, the allowable deduction is reduced by 30% of income above that threshold, though it cannot drop below $10,000.¹

To elect state sales tax instead of state income tax, check box 5a on Schedule A. You can use your actual receipts or the IRS’s optional sales tax tables.⁶

Points Paid at Closing

Points are upfront fees paid to a lender in exchange for a lower interest rate, with each point equal to 1% of the loan. The IRS treats them as prepaid interest. For a purchase of your primary home, you can deduct the full amount in the year you pay if:⁷

Paying points is a standard practice in your area
The amount charged is within the local range
You provided funds at or before closing (such as a down payment or earnest money) at least equal to the points, and those funds were not borrowed from the lender

If any test fails, or the points are for a refinance or second home, you spread the deduction evenly over the life of the loan.⁸ Seller-paid points on your behalf are also deductible by you, but you must reduce your home’s cost basis by the same amount.⁷

Private Mortgage Insurance

Buyers who put down less than 20% typically pay private mortgage insurance. The deduction for PMI premiums expired after 2021 and was gone for several years. The One Big Beautiful Bill Act brought it back starting with the 2026 tax year and made it permanent, with income-based phaseouts. Your year-end mortgage statement shows the PMI amount paid.

Closing Costs You Cannot Deduct

Several common closing costs don’t help your tax return at all. First-time buyers often assume they do, so it’s worth flagging what falls outside the deduction rules:⁹

Transfer taxes and recording fees (added to cost basis)
Appraisal fees
Owner’s title insurance and legal fees related to the purchase (added to cost basis)
Home inspection and credit report fees

Costs added to basis aren’t gone forever. They lower any taxable gain if you sell the home later. But they do nothing for the tax bill in the year you buy.¹⁰

Mortgage Credit Certificates

A mortgage credit certificate (MCC), issued by some state and local housing agencies, converts part of your annual mortgage interest into a dollar-for-dollar federal tax credit rather than a deduction. Credit rates typically run between 20% and 40% of mortgage interest, capped at $2,000 per year. Any remaining interest can still be deducted.¹¹

To qualify, you generally must be a first-time buyer with no ownership interest in a primary residence during the past three years, meet the issuing agency’s income and purchase-price limits, and use the home as your principal residence. The first-time buyer test is waived for veterans, active military members, and buyers in certain targeted areas. Claim the credit with Form 8396. Because it’s a credit, not a deduction, it lowers your actual tax owed, so even buyers who take the standard deduction can benefit.

Home Office Deduction for Self-Employed Buyers

If you’re self-employed and use part of your new home exclusively and regularly as your principal place of business, you can deduct a share of housing costs (including mortgage interest, property taxes, insurance, and utilities) proportional to the space. The simplified method allows $5 per square foot up to 300 square feet, for a maximum of $1,500.¹²

W-2 employees working from home cannot claim this deduction on their federal return, even if they work from home full-time. The deduction is limited to self-employed individuals and independent contractors.

Energy Credits Ended After 2025

If you’re planning to upgrade the new house with solar panels, a heat pump, or better insulation and expecting a federal credit, the rules changed. The Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit, which each covered 30% of qualifying costs, were terminated for any property placed in service after December 31, 2025.¹³ Improvements made before that date can still be claimed on the 2025 return. Upgrades made in 2026 or later do not qualify.

How to Claim It and When to Expect a Refund

File Schedule A with your Form 1040. Schedule A has dedicated lines for mortgage interest, points, and state and local taxes. Pull mortgage interest and points from Form 1098, and use your local tax authority receipts for property taxes.² Add Form 8396 if you have a mortgage credit certificate. Tax software will run the standard-versus-itemized comparison automatically.

Most electronically filed returns with direct deposit are processed and refunded within 21 days.¹⁴

1
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One Big Beautiful Bill
2
Internal Revenue Service. About Schedule A (Form 1040), Itemized Deductions
3
Office of the Law Revision Counsel. 26 USC 163 – Interest
4
Internal Revenue Service. Instructions for Form 1098
5
Office of the Law Revision Counsel. 26 USC 164 – Taxes
6
Internal Revenue Service. Topic No. 503, Deductible Taxes
7
Internal Revenue Service. Publication 936, Home Mortgage Interest Deduction
8
Internal Revenue Service. Topic No. 504, Home Mortgage Points
9
Internal Revenue Service. Publication 530, Tax Information for Homeowners
10
Internal Revenue Service. Publication 551, Basis of Assets
11
Internal Revenue Service. Form 8396 – Mortgage Interest Credit
12
Internal Revenue Service. Simplified Option for Home Office Deduction
13
Internal Revenue Service. FAQs for Modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D Under the One Big Beautiful Bill
14
Internal Revenue Service. Why It May Take Longer Than 21 Days for Some Taxpayers to Receive Their Federal Refund