How Much Is the Average Tax Return After Buying a House?

Most new homeowners who itemize see somewhere between $1,000 and $4,000 in additional tax savings their first full year, compared to what they would have received as renters. There is no single average tax return after buying a house because the result depends on your mortgage balance, interest rate, property taxes, state income tax, tax bracket, and when in the year you closed. The math below shows how to land on your own number.¹

Only the Amount Above the Standard Deduction Saves You Money

For the 2026 tax year, the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly.¹ Buying a home only helps your return if your total itemized deductions clear that threshold, and only the amount above it actually reduces your tax.

Say you’re married filing jointly and your itemized deductions add up to $38,200. You aren’t saving tax on the full $38,200. You’re saving on the $6,000 by which it exceeds the $32,200 you’d have claimed anyway. Multiply that $6,000 by your marginal tax rate. At 22%, it’s $1,320 in real tax savings.

Itemized deductions lower taxable income, not the tax bill dollar for dollar. A $10,000 deduction shields $10,000 of income from tax; what you keep depends on your bracket.

Mortgage Interest Is Usually the Biggest Piece

Mortgage interest is typically the largest deduction available to new homeowners. You can deduct interest on up to $750,000 of mortgage debt used to buy, build, or substantially improve your primary or secondary residence ($375,000 if married filing separately).² The One, Big, Beautiful Bill Act, signed on July 4, 2025, made that $750,000 cap permanent.³

A higher $1,000,000 limit ($500,000 if filing separately) still applies to mortgages originally taken out on or before December 15, 2017, and carries over on a refinance so long as the new balance doesn’t exceed the old one.⁴

HELOC or second-mortgage interest is deductible only if the borrowed funds were used to buy, build, or substantially improve the home securing the loan. Using a HELOC to pay off credit cards or buy a car doesn’t qualify.⁵

To put the numbers in perspective, a $400,000 30-year mortgage at 6.5% generates roughly $25,800 in interest during the first full year. That one deduction alone pushes many new homeowners past the standard deduction threshold. Your lender sends Form 1098 showing the annual interest, and that figure goes on Schedule A.⁶

Property Taxes and the Expanded SALT Cap

Real estate property taxes are deductible as part of the state and local tax (SALT) deduction. For 2026, the SALT deduction is capped at $40,400 for most filers and $20,200 for married filing separately.⁷ That’s a large jump from the $10,000 cap that applied from 2018 through 2024, courtesy of the One, Big, Beautiful Bill Act.

The cap covers combined property taxes plus either state income tax or state sales tax, whichever is larger. A homeowner paying $15,000 in property tax and $10,000 in state income tax can deduct the full $25,000 in 2026. Under the old $10,000 cap, $15,000 of that would have been lost.

High earners lose some of the benefit. The $40,400 cap phases down when modified adjusted gross income exceeds $500,000 ($250,000 for married filing separately), but it won’t fall below $10,000 ($5,000 for married filing separately).⁵ The higher cap is scheduled through 2029 and reverts to $10,000 starting in 2030 unless Congress extends it.⁸

One catch for mid-year buyers: property taxes get prorated between you and the seller based on days of ownership. You can only deduct the portion covering your period of ownership, even if you paid the seller’s share at closing. Any amount you reimbursed the seller for their share isn’t deductible; it gets added to your home’s cost basis.5

Points You Paid at Closing

Points are upfront charges paid to the lender, either to buy down your rate or as a loan origination fee. One point equals 1% of the loan amount. The IRS treats points as prepaid interest, so normally you’d deduct them over the life of the loan. On a 30-year mortgage with $6,000 in points, that’s $200 a year.

You can deduct the full amount in the year you paid them if all of the following are true:

The loan is secured by and used to buy or build your main home.
Paying points is an established practice in your area, and the amount is in line with local norms.
The points are calculated as a percentage of the mortgage principal and clearly shown on your settlement statement.
You provided funds at or before closing at least equal to the points charged, not counting funds borrowed from the lender.

Seller-paid points count as paid by you, though you have to subtract the seller-paid amount from your home’s basis. Points on a refinance don’t qualify for the immediate deduction and must be spread over the life of the new loan.⁹

What the Numbers Actually Look Like

Consider a married couple in the 22% bracket who bought a home in 2026. Their first full year they pay $22,000 in mortgage interest, $8,000 in property taxes, $5,000 in state income tax, and give $3,000 to charity. Itemized deductions total $38,000.

The 2026 joint standard deduction is $32,200, so the net benefit from itemizing is $5,800. At 22%, that’s $1,276 in actual tax savings versus taking the standard deduction as renters.¹

Change the inputs and the answer moves fast. A single filer with a $600,000 mortgage at 7% pays about $41,800 in first-year interest alone, clearing the $16,100 single-filer standard deduction with room to spare. In the 32% bracket, the savings could exceed $8,000.

Now flip it. A couple with a small mortgage in a low-tax state may find their itemized deductions barely reach $32,200 or fall short of it entirely. The standard deduction is generous enough that roughly two-thirds of homeowners don’t itemize at all, and for them buying a home doesn’t change the tax return.

What Doesn’t Boost Your Refund

A few costs new buyers expect to deduct aren’t deductible. Private mortgage insurance (PMI) and FHA mortgage insurance premiums (MIP) are not deductible for 2026; the provision that once allowed it has expired.¹⁰

Most closing costs aren’t deductible either. Attorney fees, appraisal, title insurance, recording fees, survey costs, and transfer taxes get added to your home’s cost basis rather than deducted. That reduces your taxable gain when you eventually sell, but it doesn’t help this year’s return. Homeowner’s insurance and HOA dues on a primary residence are personal expenses, neither deductible nor added to basis.

Mortgage Credit Certificates for Qualifying First-Time Buyers

Some state and local housing agencies issue Mortgage Credit Certificates (MCCs) to first-time and lower-income buyers. Unlike a deduction, an MCC is a direct tax credit that reduces your tax bill dollar for dollar.

The credit equals a percentage of the mortgage interest you paid, set by the issuing agency somewhere between 10% and 50%.¹¹ If the certificate’s rate exceeds 20%, the annual credit is capped at $2,000. At 20% or below, there’s no dollar cap beyond your tax liability. Unused credit carries forward for three years.

The remaining mortgage interest not converted into a credit can still be deducted on Schedule A if you itemize, so the MCC works alongside the mortgage interest deduction rather than replacing it. Claim the credit on Form 8396.¹²

Your First Year Is Usually a Partial Year

One detail that surprises new buyers: the calendar year you close is rarely a full year of ownership. Close in September and you only have three or four months of mortgage interest and property tax to deduct on that return. The full benefit shows up on your next tax return, the one covering your first complete calendar year in the home. If your closing date was late in the year and your itemized total falls short of the standard deduction, you take the standard deduction that year and revisit the math the following April.

1
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
2
Office of the Law Revision Counsel. 26 USC 163 – Interest
3
Internal Revenue Service. One, Big, Beautiful Bill Provisions
4
Internal Revenue Service. Real Estate Taxes, Mortgage Interest, Points, Other Property Expenses
5
Internal Revenue Service. Publication 530 – Tax Information for Homeowners
6
Internal Revenue Service. About Form 1098, Mortgage Interest Statement
7
Office of the Law Revision Counsel. 26 USC 164 – Taxes
8
Office of the Law Revision Counsel. 26 USC 164 – Taxes
9
Internal Revenue Service. Topic No. 504, Home Mortgage Points
10
Internal Revenue Service. Publication 936 – Home Mortgage Interest Deduction
11
Office of the Law Revision Counsel. 26 USC 25 – Interest on Certain Home Mortgages
12
Internal Revenue Service. About Form 8396, Mortgage Interest Credit