Homeowners who itemize can deduct mortgage interest, property taxes and other state and local taxes (up to a cap), mortgage insurance premiums, mortgage points, a portion of home costs used for a qualifying home office, and casualty losses from federally declared disasters. The catch is that these tax deductions for homeowners only produce savings when your itemized total beats the standard deduction, which for 2026 is $16,100 for single filers, $24,150 for heads of household, and $32,200 for married couples filing jointly.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Selling a primary residence brings a separate and often much larger benefit: an exclusion of up to $250,000 or $500,000 of gain.
Do Your Deductions Even Beat the Standard Deduction
This is the first question, and for many homeowners it is the only one that matters. Add up everything you could itemize: mortgage interest, state and local taxes, charitable contributions, and other qualifying expenses. If that total is higher than the standard deduction for your filing status, itemize. If not, take the standard deduction and your housing costs produce no direct federal tax benefit.2Office of the Law Revision Counsel. 26 USC 63 – Taxable Income Defined
Homeowners in the first several years of a mortgage, and those in states with high property taxes, are most likely to come out ahead by itemizing. Homeowners deep into their amortization schedule, when interest payments have shrunk, often find that the standard deduction wins.
Mortgage Interest
Mortgage interest is the single largest deduction most homeowners claim. For any mortgage taken out after December 15, 2017, you can deduct interest on up to $750,000 of loan principal ($375,000 if married filing separately). That limit covers combined debt on a primary home and one additional residence used for personal purposes. Your lender reports the interest you paid on Form 1098 and sends a copy to the IRS.3Internal Revenue Service. Publication 936, Home Mortgage Interest Deduction4Internal Revenue Service. About Form 1098, Mortgage Interest Statement
Points
Points are prepaid interest. One point equals one percent of the loan amount. If you paid points to buy or build your main home and the charges are clearly shown on your settlement statement, you can usually deduct them in full in the year you paid them.5Internal Revenue Service. Topic No. 504, Home Mortgage Points Points paid on a refinance are different: you generally spread that deduction evenly over the life of the new loan.3Internal Revenue Service. Publication 936, Home Mortgage Interest Deduction
HELOCs and Home Equity Loans
Interest on a home equity line of credit or home equity loan is deductible only when you use the borrowed money to buy, build, or substantially improve the home securing the loan. The combined balance of your first mortgage and the equity loan still has to stay within the $750,000 limit. Substantial improvements are projects that add value, extend the home’s useful life, or adapt it for new uses, such as a kitchen renovation or a room addition. Routine maintenance, repainting, and minor repairs do not count. Use a HELOC to pay off credit cards or fund tuition and the interest is not deductible, regardless of loan amount.
Documentation gets tricky when HELOC draws land in a general checking account you also use for everyday bills. It becomes hard to prove which dollars went toward qualifying improvements. Keep invoices, contractor receipts, and records that tie each draw to a specific project.
Property Taxes and the SALT Cap
Real estate taxes imposed by your local government based on the assessed value of your property qualify as an itemized deduction.6Office of the Law Revision Counsel. 26 US Code 164 – Taxes The tax has to be ad valorem, meaning tied to the property’s value. Flat fees, service charges for trash or water, and special assessments for local improvements such as new sidewalks or sewer lines generally do not qualify.
Property taxes fall under the cap on state and local taxes, commonly called SALT. Under the One Big Beautiful Bill Act signed in July 2025, the SALT cap for 2026 rose to approximately $40,000 for most filers, up from the $10,000 limit in place since 2018. The cap phases down for taxpayers with modified adjusted gross income above $500,000, dropping 30 cents for each dollar over that threshold until it reaches a $10,000 floor. Both the $40,000 cap and the income threshold increase by one percent each year through 2029. Your combined property taxes and state income or sales taxes all count toward this single cap. Anything above it produces no further federal tax reduction.
Mortgage Insurance Premiums
If you put less than 20 percent down, your lender likely required private mortgage insurance. For 2026, premiums on PMI and government mortgage insurance (FHA and USDA loan premiums) are once again deductible after a multi-year lapse. The One Big Beautiful Bill Act made this deduction permanent; it had not been available since tax year 2021.7US Mortgage Insurers. Mortgage Insurance Deductible Once Again Starting Tax Year 2026
The deduction phases out when modified adjusted gross income exceeds $100,000 ($50,000 if married filing separately) and disappears entirely at $109,000 ($54,500 married filing separately). These thresholds have not been updated since 2007, so they effectively exclude a wider group of homeowners each year. Check where your income falls before counting on this one.
Home Office (Self-Employed Only)
If you are self-employed and use part of your home exclusively and regularly as your primary place of business, you can deduct a portion of your housing costs. The space does not have to be a whole room, but it must be used only for work.8Office of the Law Revision Counsel. 26 US Code 280A – Disallowance of Certain Expenses in Connection With Business Use of Home
You have two options. The simplified method gives you $5 per square foot of office space, up to 300 square feet, for a maximum deduction of $1,500, and you avoid tracking individual expenses.9Internal Revenue Service. How Small Business Owners Can Deduct Their Home Office From Their Taxes The actual expense method has you calculate the percentage of your home’s square footage used for business, then apply that percentage to costs like utilities, insurance, repairs, and depreciation. It requires more recordkeeping but can yield a larger deduction.10Internal Revenue Service. Simplified Option for Home Office Deduction
W-2 employees who work from home cannot claim this deduction, even when the employer requires remote work. The Tax Cuts and Jobs Act eliminated miscellaneous itemized deductions for employee business expenses starting in 2018, and that change is still in effect for 2026. Only self-employed individuals, independent contractors, and certain gig workers qualify.
Casualty and Disaster Losses
Unreimbursed damage to your home is deductible only when it results from a federally declared disaster. Since 2018, personal casualty losses from events without a federal disaster declaration have not been deductible.11Internal Revenue Service. Topic No. 515, Casualty, Disaster, and Theft Losses
Even for qualifying disasters, the math shrinks the deduction. Start with your loss, subtract insurance reimbursement (or expected reimbursement), then subtract $100 per casualty event, then subtract 10 percent of your adjusted gross income. What remains is deductible. For qualified disaster losses, you can elect to skip the 10 percent AGI threshold, reduce each event by $500 instead of $100, and take the deduction even without itemizing. Filing an insurance claim is required. Skip it and you lose the deduction.
The Capital Gains Exclusion When You Sell
This is the biggest tax benefit most homeowners will ever use, and it operates at sale rather than through your annual return. When you sell your primary residence, you can exclude up to $250,000 of profit from taxable income ($500,000 for married couples filing jointly).12Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence Buy a home for $300,000, sell for $525,000, and a single filer owes no tax on the $225,000 gain.
To qualify, you have to pass two tests during the five-year period ending on the sale date:13Internal Revenue Service. Topic No. 701, Sale of Your Home
- Ownership test: you owned the home for at least two of the five years before the sale.
- Use test: you lived in the home as your primary residence for at least two of those five years. Those two years do not have to be consecutive.
For married couples filing jointly, only one spouse needs to meet the ownership test, but both must meet the use test to claim the full $500,000 exclusion. You generally cannot use this exclusion if you already excluded gain from another home sale in the prior two years. A surviving spouse who sells within two years of their spouse’s death may still qualify for the $500,000 exclusion.
What You Cannot Deduct
Several common homeowner expenses look deductible but are not. Getting this wrong invites audits and penalties.
- Homeowners insurance premiums are a personal expense unless the home is used for business.
- HOA fees are personal, deductible only in part if you use the home as a business office or rent it out.
- Utilities and routine maintenance are personal costs, except the portion allocated to a qualifying home office.
- Home improvements do not produce a current-year deduction, but they add to your cost basis and reduce taxable gain when you sell.
- Residential energy credits (the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit) were repealed for property placed in service after December 31, 2025. No federal credit is available for residential energy improvements in 2026.
How to Claim These Deductions
All itemized homeowner deductions go on Schedule A, attached to Form 1040.14Internal Revenue Service. About Schedule A (Form 1040), Itemized Deductions Mortgage interest and points go on their designated lines in the interest section. Property taxes and state income or sales taxes go in the taxes section, where the SALT cap applies to the combined total. Mortgage insurance premiums go in the interest section alongside mortgage interest.
Hold onto Form 1098 from each lender, property tax bills and payment receipts, and documentation supporting any home office or casualty loss claim. The IRS generally has three years to audit a return, but that extends to six years if income is substantially understated, so keeping records for at least six years is the safer approach. For the home sale exclusion, retain purchase records, closing statements, and receipts for capital improvements for as long as you own the property and for several years after you sell. Those documents establish your cost basis and prove you qualify.