Does Being a Homeowner Help With Taxes? Mortgage, SALT, Credits

Owning a home unlocks several federal tax benefits that renters cannot use, and the biggest homeowner tax deductions are for mortgage interest, state and local taxes (including property tax), and mortgage points, all claimed by itemizing on Schedule A. Homeowners can also claim credits for certain energy-efficient upgrades without itemizing, and exclude a large chunk of profit from tax when they sell. How much you actually save depends on your filing status, your income, and whether your itemized deductions beat the standard deduction. The One Big Beautiful Bill Act, signed in 2025, has reshaped several of these benefits for the 2026 tax year.

Do Your Deductions Beat the Standard Deduction

Homeowner deductions only help if you itemize on Schedule A of Form 1040 instead of taking the standard deduction.¹ Itemizing makes sense when your qualifying expenses (mortgage interest, property taxes, state income taxes, charitable gifts, and other eligible costs) add up to more than the standard deduction for your filing status.

For the 2026 tax year, the standard deduction is $16,100 for single filers, $32,200 for married couples filing jointly, $24,150 for head of household, and $16,100 for married filing separately.² If your deductible expenses come in below those numbers, the standard deduction wins automatically and the deductions below go unused on your federal return. Tax credits for energy improvements work differently and apply either way, as covered later.

Mortgage Interest

If you itemize, the interest on your home loan is usually the largest single write-off. You can deduct interest paid on up to $750,000 of mortgage debt used to buy, build, or substantially improve your home ($375,000 if married filing separately). Mortgages taken out before December 16, 2017, keep the older $1,000,000 limit.³ The deduction covers your primary home and one additional home you use personally.

Only interest counts. The portion of your payment that goes to principal is not deductible. Each January, your lender sends Form 1098 showing exactly how much interest you paid during the year, and that figure is what you carry to Schedule A.⁴

Starting with the 2026 tax year, private mortgage insurance (PMI) premiums are once again deductible as part of the mortgage interest deduction, and this time the change is permanent. If your down payment was under 20 percent and you pay PMI, add those premiums to your deductible mortgage interest.

Mortgage Points

Discount points you pay to lower the rate on a purchase mortgage are typically deductible in full in the year you pay them. Each point equals one percent of the loan amount. To deduct them all at once, the loan must be for buying or improving your main home, the points must be within the normal range for your area, and you must have paid at least that amount in cash at or before closing.⁵ Points paid on a refinance are usually spread over the life of the loan instead.

Home Equity Loan and HELOC Interest

Interest on a home equity loan or line of credit is deductible only when the money is used to buy, build, or substantially improve the same home that secures the loan. Use a HELOC to pay off credit cards or fund a vacation, and the interest is not deductible even though your house is on the line.⁶ The $750,000 cap applies to your primary mortgage and home equity borrowing combined.

State and Local Taxes, Including Property Tax

If you itemize, you can also deduct the property taxes you pay to local governments, along with state income or sales taxes, under the SALT deduction. For years the deduction was capped at $10,000 ($5,000 for married filing separately), which crushed its value for homeowners in high-tax states.⁷

For the 2026 tax year the cap jumps to $40,400 for most filers ($20,200 for married filing separately).² A homeowner who pays $18,000 in property taxes and $12,000 in state income taxes can now deduct the full $30,000, which was impossible under the old cap.

High earners lose some of the benefit. Once your modified adjusted gross income tops roughly $505,000, the deduction phases down, but it cannot drop below a $10,000 floor. The cap is scheduled to rise one percent each year through 2029, then snap back to $10,000 for tax years starting in 2030.⁷ Remember, the cap covers your combined state and local taxes, not property taxes alone.

Credits for Energy-Efficient Upgrades

Credits reduce your tax bill dollar for dollar, and unlike deductions they work whether or not you itemize. The Energy Efficient Home Improvement Credit covers 30 percent of qualifying upgrades, with annual caps:⁸

$1,200 overall cap per year for most energy-efficient property and improvements
$250 per exterior door, $500 total for all doors
$600 total for windows and skylights
$150 for a home energy audit
$2,000 per year for heat pumps, heat pump water heaters, and biomass stoves (separate from the $1,200 cap)

Install a qualifying heat pump and new windows in the same year, and you could claim up to $2,600 in credits.⁹ These are annual, not lifetime, limits, so future projects can generate credits in future years.

One important boundary: the Residential Clean Energy Credit, which covered 30 percent of solar panels, wind turbines, geothermal heat pumps, and battery storage, is no longer available for property installed after December 31, 2025. If you finished a qualifying install before that date, you can still claim it on the return for that year.¹⁰

The Capital Gains Exclusion When You Sell

Sell your primary residence at a profit, and federal law lets you exclude a big share of the gain from income entirely. Single filers can exclude up to $250,000; married couples filing jointly can exclude up to $500,000.¹¹ The excluded amount never enters your adjusted gross income, so it does not push you into a higher bracket or affect income-based thresholds for other benefits.

To qualify, you must have owned the home and used it as your main residence for at least two of the five years before the sale. Those two years do not have to be consecutive.¹² You can only use this exclusion once every two years.¹¹

A partial exclusion may apply if you sell before the two-year mark because of a job change, a health condition, or certain unforeseen circumstances such as divorce or a natural disaster. The amount is proportional to the time you did meet the tests.

Home Office Deduction, for the Self-Employed Only

If you are self-employed and use part of your home exclusively and regularly for your business, you can deduct expenses tied to that space. The area has to be your principal place of business or a spot where you regularly meet clients. A room that doubles as a guest bedroom does not qualify.¹³

You have two options. The simplified method gives you $5 per square foot, up to 300 square feet, for a maximum of $1,500.¹⁴ The regular method has you calculate actual expenses (mortgage interest, property taxes, insurance, utilities, repairs) and allocate the business-use percentage. More paperwork, often a bigger deduction.

W-2 employees who work from home cannot claim this deduction. Only self-employed people, independent contractors, and gig workers qualify.

The 14-Day Rental Rule

Rent your home out for fewer than 15 days in the year and you owe no tax on the rental income at all. You keep whatever you collect, and you still deduct your mortgage interest and property taxes as usual on Schedule A.¹⁵ This works well if a big event pushes short-term rental rates in your area, like a nearby golf tournament or a college football weekend. Hit 15 days and the full rental income becomes reportable.

What You Cannot Deduct

Some familiar homeownership costs give no federal tax break, even if you itemize:

Homeowner’s insurance premiums, including fire, hazard, and comprehensive coverage
HOA and condo association dues, because they are imposed by a private entity, not a government
Utilities such as electricity, gas, water, and internet
General repairs, like fixing a leaky faucet, patching drywall, or repainting a room

IRS guidance lists these as nondeductible expenses for homeowners.¹⁶

Repairs and improvements are different. A repair restores your home to its existing condition (a broken window replaced). An improvement adds value, extends useful life, or adapts the home to a new use (a new roof, a finished basement, a deck). Neither is directly deductible on a personal residence, but improvements raise your cost basis, which shrinks your taxable gain when you sell. Save the receipts. A big improvement paper trail can meaningfully expand what the capital gains exclusion shelters when the sale happens.

If you rented out your home or claimed a home office deduction along the way, you probably took depreciation, and the IRS taxes that depreciation-related gain at up to 25 percent when you sell, even when the rest of your profit falls inside the exclusion.¹⁷ Worth planning for before you list.

1
Internal Revenue Service. About Schedule A (Form 1040), Itemized Deductions
2
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
3
Office of the Law Revision Counsel. 26 USC 163 – Interest
4
Internal Revenue Service. About Form 1098, Mortgage Interest Statement
5
Internal Revenue Service. Topic No. 504, Home Mortgage Points
6
Internal Revenue Service. Publication 936, Home Mortgage Interest Deduction
7
Office of the Law Revision Counsel. 26 USC 164 – Taxes
8
Office of the Law Revision Counsel. 26 USC 25C – Energy Efficient Home Improvement Credit
9
Internal Revenue Service. Energy Efficient Home Improvement Credit
10
Internal Revenue Service. Residential Clean Energy Credit
11
Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
12
eCFR. 26 CFR 1.121-1 – Exclusion of Gain From Sale or Exchange of a Principal Residence
13
Internal Revenue Service. Publication 587, Business Use of Your Home
14
Internal Revenue Service. Simplified Option for Home Office Deduction
15
Internal Revenue Service. Publication 527, Residential Rental Property
16
Internal Revenue Service. Publication 530, Tax Information for Homeowners
17
Internal Revenue Service. Topic No. 409, Capital Gains and Losses