There is no single tax deduction for buying a house, but homeownership unlocks several federal deductions that can lower your taxable income if you itemize. The main ones are mortgage interest, state and local property taxes, qualifying loan points, and mortgage insurance premiums. Whether any of them actually save you money depends on one comparison: your total itemized deductions against the standard deduction, which for 2026 is $32,200 for married couples filing jointly, $24,150 for heads of household, and $16,100 for single filers and married people filing separately.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 In the first year of a mortgage, when interest is at its highest, many buyers clear that threshold. Others don’t, and are better off leaving the standard deduction alone.
Mortgage Interest
Mortgage interest is the largest tax benefit most buyers get. You can deduct the interest on up to $750,000 of mortgage debt used to buy, build, or substantially improve your home, or $375,000 if you’re married filing separately.2Internal Revenue Service. Publication 936, Home Mortgage Interest Deduction The loan has to be secured by the home itself. A standard mortgage or deed of trust qualifies; an unsecured personal loan you used for a down payment does not.
The deduction covers your primary residence and one second home. If your loan balance exceeds $750,000, the interest doesn’t disappear — you deduct the portion tied to the allowed debt, based on a ratio of the cap to your actual balance.
Older loans get a more generous treatment. If you took out your mortgage before December 16, 2017, you can deduct interest on up to $1,000,000 of that grandfathered debt, or $500,000 if married filing separately.2Internal Revenue Service. Publication 936, Home Mortgage Interest Deduction The higher limit sticks as long as you don’t refinance above the original balance.
One boundary worth naming: interest on a home equity loan or line of credit is deductible only when the funds go toward buying, building, or substantially improving the home securing the loan.2Internal Revenue Service. Publication 936, Home Mortgage Interest Deduction Using a HELOC to pay off credit cards or fund tuition doesn’t produce a deduction, and the combined balance of your purchase mortgage plus any home equity debt still can’t push you past the $750,000 cap.
Points Paid at Closing
Points are upfront fees you pay the lender at closing, each one equal to one percent of the loan amount. Because they function as prepaid interest, they can be deductible.3Office of the Law Revision Counsel. 26 U.S. Code 461 – General Rule for Taxable Year of Deduction
For a primary residence purchase, you can deduct the full cost of points in the year you close if all of the following are true:4Internal Revenue Service. Publication 530, Tax Information for Homeowners
- The loan is secured by the home you live in most of the time.
- Paying points is an established practice in your area, and the amount doesn’t exceed what’s typical there.
- Points are figured as a percentage of the loan and clearly shown on your settlement statement.
- Points don’t stand in for other fees that are normally itemized separately, such as appraisal, title, or attorney costs.
- The cash you brought to closing (down payment, earnest money, escrow deposit) is at least equal to the points charged, and you did not borrow the money used to pay them from the lender.
On a refinance or a second-home loan, you spread the deduction evenly over the life of the loan rather than taking it all in year one.5Internal Revenue Service. Home Mortgage Points If the seller paid points on your behalf, you can still deduct them, but you have to reduce your home’s cost basis by the same amount.4Internal Revenue Service. Publication 530, Tax Information for Homeowners
Property Taxes and the SALT Cap
State and local property taxes on your home are deductible if you itemize.6Office of the Law Revision Counsel. 26 U.S. Code 164 – Taxes In your purchase year, you only deduct the share covering your period of ownership. If the seller had already paid the full annual bill, you reimbursed them at closing for the months you’d own the home, and that reimbursement is the piece that goes on your return. Your Closing Disclosure breaks the split out clearly.
The ceiling is the SALT cap. Your combined deduction for state and local income (or sales) taxes plus property taxes cannot exceed $40,400 for 2026, or $20,200 if married filing separately.7Office of the Law Revision Counsel. 26 U.S.C. 164 – Taxes That’s the raised cap under the One Big Beautiful Bill Act, and it grows by one percent per year through 2029.
High earners get squeezed further. If your modified adjusted gross income exceeds $505,000 for 2026 ($252,500 if married filing separately), the $40,400 cap phases down at 30 percent of income above that threshold, though it never drops below a $10,000 floor.7Office of the Law Revision Counsel. 26 U.S.C. 164 – Taxes For a well-paid household in a high-tax state, a real chunk of the property tax bill may not be deductible no matter how you file.
Transfer taxes and recording fees at closing are not property taxes for this purpose.4Internal Revenue Service. Publication 530, Tax Information for Homeowners They roll into your cost basis instead, which cuts your taxable gain when you sell.
Mortgage Insurance Premiums
If your down payment was under 20 percent, your lender likely required private mortgage insurance. Those premiums are deductible as an itemized deduction, and the One Big Beautiful Bill Act made this deduction permanent starting in 2026. It applies to private policies and to government programs including FHA, VA, and USDA loans. The amount you paid appears in Box 5 of your Form 1098.8Internal Revenue Service. Instructions for Form 1098
There is an income phaseout. The deduction starts shrinking when your adjusted gross income exceeds $100,000 ($50,000 if married filing separately) and disappears entirely at $110,000 ($55,000 filing separately). Those thresholds have never been indexed to inflation, so they now catch more households than they once did. If you’re anywhere close, run the numbers before you count on it.
Closing Costs That Aren’t Deductible
Most closing costs beyond mortgage interest, points, and property taxes are not deductible. The IRS specifically identifies the following as non-deductible for a home purchase:4Internal Revenue Service. Publication 530, Tax Information for Homeowners
- Appraisal fees
- Notary fees
- Title insurance and title search fees
- Mortgage note preparation costs
- Inspection fees
- Attorney fees related to the purchase
These costs still matter. You add them to the cost basis of your home, which is the figure the IRS uses to calculate your taxable gain or loss when you sell.9Internal Revenue Service. Publication 523, Selling Your Home A higher basis means less taxable profit later. Keep your Closing Disclosure so every line item is on record when that day arrives.
Does Itemizing Actually Help You
Every homeowner deduction here requires itemizing on Schedule A. You only benefit when your itemized total beats the standard deduction for your filing status.
Consider a $300,000 home with a 30-year mortgage at 7 percent. First-year interest runs roughly $20,800. Add $4,000 in property taxes and you’re at about $24,800. A single filer clears $16,100 comfortably. A married couple filing jointly is still short of $32,200 and probably comes out ahead with the standard deduction unless they have other itemizable items like charitable gifts or state income taxes. Doing that comparison before you file is the step that decides whether buying a house actually cut your tax bill.
Documents to Have Ready
Your lender sends Form 1098 by late January. Box 1 reports mortgage interest paid, Box 5 shows mortgage insurance premiums, and Box 6 lists points paid on a primary residence purchase.8Internal Revenue Service. Instructions for Form 1098 Those numbers move straight to Schedule A.
Your Closing Disclosure covers what 1098 doesn’t: the pro-rated property tax split with the seller, points that didn’t make it onto the 1098, and the non-deductible settlement charges you’ll fold into your cost basis. If you paid points that aren’t on your 1098, you can still deduct them by reporting the amount on Schedule A and keeping your closing documentation on hand.
Hold both forms for at least three years after filing, the general statute of limitations for an IRS audit.10Internal Revenue Service. How Long Should I Keep Records Since your Closing Disclosure also sets your cost basis, keeping it until you sell is safer.
The Mortgage Interest Credit for Some Buyers
A smaller group of buyers qualifies for something more valuable than a deduction: a direct credit through a Mortgage Credit Certificate. State and local housing agencies issue MCCs, generally to first-time buyers or buyers in targeted areas who meet income limits. With an MCC, you file Form 8396 to turn part of your mortgage interest into a dollar-for-dollar credit against tax owed.11Internal Revenue Service. About Form 8396, Mortgage Interest Credit You cannot double-count: the interest converted into the credit reduces the interest you can deduct on Schedule A. Your lender or a local housing finance agency can tell you whether your loan qualifies.