What Sort of Tax Benefits Are Available to Homeowners?

For 2026, a homeowner with a mortgage can claim six main federal tax breaks: deductions for mortgage interest, points, mortgage insurance premiums, and property taxes; a tax credit if a housing agency issued you a mortgage credit certificate; and an exclusion of up to $250,000 of profit ($500,000 for most married couples filing jointly) when you sell your main home. The four deductions help only if you itemize on Schedule A and your itemized total is larger than your 2026 standard deduction: $16,100 single, $32,200 married filing jointly, or $24,150 head of household. The credit and the home sale exclusion apply whether or not you itemize.

The 2026 homeowner tax breaks at a glance

Mortgage interest and points

Mortgage interest is deductible when the loan is secured by your main home or one second home and the money bought, built, or substantially improved that home. That rule covers first and second mortgages, refinances up to the old balance, and home equity loans or lines of credit (HELOCs) spent on the house. See which loans and homes qualify for the interest deduction for the full set of tests.

The deduction is capped by the size of the debt, not the amount of interest. You can deduct interest on up to $750,000 of mortgage debt taken out after December 15, 2017, or $1 million on older loans. The mortgage debt limits and how refinancing affects them are explained in a separate article.

Points, also called discount points or loan origination fees, are interest you prepay at closing to get a lower rate. According to IRS Publication 936, you can deduct them in full in the year you pay them when the loan buys or builds your main home, paying points is normal in your area, the points are a percentage of the loan amount, and the cash you bring to closing is at least equal to the points. The same full deduction is available for points on a loan to substantially improve your main home, including the improvement share of a refinance. Other refinance points and points on a second-home loan are deducted a little each year over the life of the loan. Fees for services, such as appraisal and notary fees, are not points and are not deductible.

Mortgage insurance premiums are deductible again in 2026

The One Big Beautiful Bill Act, signed July 4, 2025, brought back the mortgage insurance deduction for tax years starting in 2026 and made it permanent. Premiums paid in 2022 through 2025 were not deductible.

The deduction covers mortgage insurance from the FHA, VA, and the USDA Rural Housing Service, plus private mortgage insurance, when the policy was issued after 2006 and the loan bought, built, or improved your first or second home. Your lender reports the premiums in box 5 of Form 1098.

Income limits make this deduction narrower than the interest deduction. The amount you can deduct drops by 10% for each $1,000, or part of $1,000, of AGI above $100,000, so it is gone once AGI passes $109,000. Married couples filing separately lose 10% for each $500 above $50,000, and the deduction ends above $54,500. If you paid several years of PMI upfront, you spread the cost over the shorter of the loan term or 84 months; that spreading rule does not apply to VA funding fees or USDA guarantee fees. Other loan costs are covered in mortgage costs you can deduct besides interest.

Property taxes under the 2026 SALT cap

You can deduct the real estate taxes on your home, but they share one cap with your state and local income taxes (or sales taxes, if you choose those instead). For 2026, that combined cap is $40,400, or $20,200 if married filing separately, up from $10,000 before 2025.

Higher earners get a smaller cap. If your modified AGI is above $505,000, the cap drops by 30% of the excess, but never below $10,000. Married couples filing separately use half of each figure: the cap starts shrinking above $252,500, falls by 15% of the excess, and stops at $5,000. For example, a couple with modified AGI of $555,000 is $50,000 over the threshold, so their cap falls by $15,000 to $25,400. The cap rises 1% a year through 2029 and returns to $10,000 in 2030.

Three practical limits apply. Your tax bill can include charges that are not deductible taxes, such as a yearly trash collection fee or an assessment to build sidewalks or sewer lines, so deduct only the tax itself. If your lender pays taxes from an escrow account, you deduct only what the lender actually paid to the taxing authority during the year, not what you deposited. Foreign real estate taxes are not deductible.

Who actually benefits once you count the standard deduction

A homeowner deduction lowers your tax only to the extent that all your itemized deductions together exceed your standard deduction. Itemized deductions include mortgage interest, eligible mortgage insurance, state and local taxes up to the cap, and charitable gifts.

Two 2026 examples show the difference:

1. A married couple filing jointly with AGI of $140,000 pays $11,000 in mortgage interest, $7,000 in property taxes, and $6,000 in state income tax, and gives $2,000 to charity. Starting in 2026, itemizers can deduct only charitable gifts above 0.5% of AGI, so $1,300 of the gift counts. Their itemized total is $25,300, which is less than the $32,200 standard deduction. They take the standard deduction, and the mortgage gives them no added federal tax savings.
2. A single filer pays $14,000 in mortgage interest and $6,000 in property and state income taxes. The $20,000 total beats the $16,100 standard deduction by $3,900. In the 22% bracket, itemizing saves about $858 ($3,900 x 0.22), not the $3,080 that 22% of the interest alone would suggest.

Starting in 2026, people who take the standard deduction can also deduct up to $1,000 ($2,000 married filing jointly) of cash gifts to charity, which slightly raises the bar for itemizing. For the full worksheet, including the IRS method for loans above $750,000, see how to calculate the mortgage tax deduction.

The mortgage credit certificate

A mortgage credit certificate (MCC) is issued by a state or local government, generally with a new mortgage to buy your main home, and the IRS describes the credit as aimed at lower-income buyers. It turns part of your mortgage interest into a tax credit, which cuts your tax bill dollar for dollar instead of reducing taxable income.

The credit equals the certificate rate times the interest you paid on the certified loan amount, and you figure it on Form 8396. If the rate is above 20%, the credit is capped at $2,000 a year. The credit also cannot exceed your federal income tax for the year; unused credit can be carried forward up to 3 years. You must reduce your mortgage interest deduction by the credit amount, and you may owe some of the benefit back if you sell the home within 9 years. More on how certificates work is in what a mortgage credit certificate is.

Selling your home: the $250,000 or $500,000 exclusion

When you sell your main home, you can leave up to $250,000 of profit out of your taxable income, or $500,000 on a joint return. To qualify, you must have owned the home and lived in it as your main home for at least 24 months of the 5 years before the sale, and you cannot have used the exclusion on another home sale in the prior 2 years. The 24 months do not have to be continuous. For the $500,000 amount, one spouse must meet the ownership test and both must meet the residence test. If you sell before meeting these tests because of a job move, health reasons, or certain unforeseen events, you may qualify for a reduced exclusion. Profit equal to depreciation you claimed, or were entitled to claim, after May 6, 1997, for example on a home office or a rented room, stays taxable.

The exclusion does not apply to a rental house or other investment real estate you never lived in. Owners of business or investment real estate can instead postpone the tax by swapping it for other business or investment real estate in a 1031 exchange, reported on Form 8824.

Breaks that no longer apply

• Energy credits for your home. The 2025 law ended the energy efficient home improvement credit for property placed in service after December 31, 2025, and the residential clean energy credit (such as for solar panels or battery storage) for spending after that date. Neither can be claimed for 2026 work.
• Home equity interest spent on other things. Interest on a home equity loan or HELOC used for a car, tuition, or credit card payoff is not deductible, and the 2025 law made that rule permanent.
• Home office deduction for employees. Publication 587 allows the deduction only for business use, such as self-employment, and only for space used regularly and exclusively for that business. An employee who works from home cannot claim it. Self-employed owners can use the simplified method of $5 per square foot for up to 300 square feet.
• Ordinary homeowner costs. Homeowners insurance, HOA fees, utilities, repairs, and the principal part of your mortgage payment are not deductible on your main home.