Homeownership Tax Benefits: What Homeowners Can and Cannot Deduct

Updated October 31, 2026

By Stacy Schlesinger | President, Platinum Lending Solutions | NMLS #252075

One of the things people often hear about buying a home is that homeownership comes with tax benefits.

And depending on your circumstances, that's true.

Certain homeowners may qualify to deduct mortgage interest, property taxes, or other eligible expenses. There can also be tax benefits when you eventually sell your primary residence.

But here's something I want homebuyers to understand before making a purchase decision:

Owning a home does not automatically lower your taxes. Not every homeownership expense is tax-deductible.

Your filing status, income, mortgage, property expenses, and whether you itemize deductions can all affect the result.

Tax laws also change, which makes it important to use current information rather than relying on advice from several years ago.

This guide covers federal homeownership tax considerations for 2026. Use it to prepare questions for a qualified tax professional.

What Are the Main Tax Benefits of Owning a Home?

The potential federal tax benefits associated with homeownership generally fall into several categories.

Potential tax benefit	What homeowners should understand
Mortgage interest deduction	Qualified interest may be deductible when you itemize, subject to applicable limits
Property tax deduction	Eligible property taxes may be included in the state and local tax deduction
Mortgage points	Certain qualifying points may be deductible immediately or over the loan term
Mortgage insurance premiums	Certain qualified premiums may be deductible beginning in the 2026 tax year
Home sale gain exclusion	Eligible sellers may exclude a portion of the gain from selling a primary residence
Certain improvements	Some improvements may increase the property's tax basis rather than provide an immediate deduction

These benefits don't apply equally to every homeowner.

Some require itemizing deductions, while others depend on the property's use, the timing of expenses, and specific eligibility requirements.

My advice: Understand the potential tax treatment, but make sure the home and mortgage are affordable without relying on a particular tax outcome.

1. Understand the Difference Between the Standard Deduction and Itemizing

Before discussing individual homeowner deductions, it's important to understand how federal deductions generally work.

Most taxpayers can choose between taking the standard deduction and itemizing eligible deductions, subject to applicable rules.

The standard deduction is a specified amount based primarily on filing status.

Itemizing involves adding up qualifying expenses, such as eligible mortgage interest, state and local taxes, charitable contributions, and certain other deductible items.

Generally, taxpayers choose the approach that provides the greater allowable deduction.

What Is the Standard Deduction for 2026?

For the 2026 federal tax year, the IRS has announced the following standard deduction amounts:

Filing status	2026 standard deduction
Single	$16,100
Married filing jointly	$32,200
Head of household	$24,150
Married filing separately	$16,100

Additional amounts or different rules may apply to certain taxpayers, including eligible older taxpayers and individuals who are blind.

These figures apply to the 2026 tax year, generally reported on returns filed in 2027.

You can review the IRS's 2026 inflation adjustments.

Why Does This Matter for Homeowners?

Imagine a married couple filing jointly who has $20,000 in total eligible itemized deductions for the year.

Their $20,000 in itemized deductions is below the $32,200 standard deduction for 2026. That remains true even if much of the $20,000 is mortgage interest and property taxes.

Assuming they're eligible to use the standard deduction, itemizing those expenses wouldn't provide a larger deduction.

That doesn't mean their mortgage interest or property taxes have no financial cost.

It means the expenses may not produce an additional federal income tax benefit compared with the deduction already available to them.

This is why I encourage homebuyers not to assume that every dollar paid toward mortgage interest or property taxes will reduce their tax bill.

2. How Does the Mortgage Interest Deduction Work?

One of the most familiar potential benefits of homeownership is the mortgage interest deduction.

When you make a payment on a traditional amortizing mortgage, part of your principal and interest payment goes toward interest.

That interest is the cost of borrowing the money.

If you itemize deductions and satisfy the applicable requirements, certain home mortgage interest may be deductible on your federal income tax return.

However, there are important limitations.

Which Mortgages May Qualify?

Under federal rules, the mortgage generally must be secured by a qualified home, such as your primary residence or an eligible second home.

The borrowed funds must also meet applicable use requirements.

For example, mortgage interest on a qualifying loan used to purchase or substantially improve the home securing it may be deductible, subject to the applicable limits.

Interest on loans used for unrelated personal expenses generally doesn't receive the same treatment simply because the debt is secured by your home.

What Are the Mortgage Interest Deduction Limits?

For qualifying mortgage debt incurred after December 15, 2017, the federal deduction generally applies to interest on up to $750,000 of qualifying home acquisition debt, or $375,000 for married taxpayers filing separately.

Certain qualifying mortgages originating on or before December 15, 2017, may be subject to a higher $1 million limit, or $500,000 for married filing separately.

Special rules apply to certain older loans, refinances, and situations involving more than one qualified residence.

These figures are limits on the amount of qualifying debt used to calculate deductible interest, not automatic deductions of those dollar amounts.

For more detail, review IRS Publication 936: Home Mortgage Interest Deduction.

Is the Entire Mortgage Payment Deductible?

No.

The principal portion of your mortgage payment generally isn't deductible as mortgage interest.

For example, if your mortgage payment includes $1,400 in principal and interest, that doesn't mean the entire $1,400 is deductible.

Only the eligible interest portion may qualify, subject to the tax rules.

Amounts paid toward escrow, insurance, and other expenses must be evaluated separately.

For additional information about your monthly payment, see our guide to how a mortgage works.

3. Can You Deduct Property Taxes?

Eligible state and local real estate taxes may be deductible when you itemize.

However, these deductions are included within the broader federal state and local tax deduction, commonly called the SALT deduction.

The SALT rules also cover certain state and local income taxes or eligible general sales taxes, depending on the taxpayer's election and circumstances.

What Is the SALT Deduction Limit for 2026?

For the 2026 tax year, the general federal deduction limit for combined eligible state and local taxes is $40,400, or $20,200 for married taxpayers filing separately.

However, that limit is reduced for taxpayers whose modified adjusted gross income exceeds $505,000, or $252,500 for married filing separately.

Under the applicable 2026 rules, the phased-down limit cannot fall below $10,000, or $5,000 for married filing separately.

These are federal tax rules for 2026. The limits and income thresholds may differ in other tax years.

You can review the IRS's 2026 SALT deduction guidance.

Are All Property-Related Taxes Deductible?

Not necessarily.

Qualifying real estate taxes are generally based on the assessed value of the property and imposed under applicable taxing authority rules.

Certain assessments for specific local improvements or benefits may not qualify as deductible property taxes, although exceptions and other tax-basis treatment may apply.

Your mortgage servicer may collect property-tax money through escrow each month. Depositing that money into escrow does not, by itself, establish a tax deduction for that year.

The actual tax payment and applicable timing rules matter.

Your mortgage servicer or local tax authority may provide records showing the amounts paid.

For more about escrow accounts, see our article on what escrow is and how it works.

4. Can Mortgage Points Be Tax-Deductible?

Possibly.

Mortgage points are sometimes paid upfront in connection with obtaining a particular interest rate.

Certain qualifying points may be treated as prepaid mortgage interest for federal income tax purposes.

However, the rules depend on the type of mortgage, property, purpose of the loan, and how the points were paid.

For example, qualifying points paid when purchasing a primary residence may be deductible in the year paid if the IRS requirements are met.

In other circumstances, points may need to be deducted over the life of the loan rather than all at once.

What About Points Paid When Refinancing?

Points paid in connection with refinancing generally follow different timing rules.

In many cases, eligible refinancing points are deducted over the repayment period of the new loan rather than being fully deductible immediately.

Certain exceptions may apply, including qualifying amounts associated with substantial improvements to a primary residence.

Not every fee called a point is deductible mortgage interest.

Appraisal fees, document preparation charges, and other service-related lender fees don't automatically become deductible merely because they're collected at closing.

You can review IRS Tax Topic 504: Home Mortgage Points for additional guidance.

5. Are Mortgage Insurance Premiums Deductible in 2026?

This is one of the important tax-law changes homeowners should be aware of.

The federal itemized deduction for qualifying mortgage insurance premiums had expired for earlier tax years.

Beginning in the 2026 tax year, federal law again allows qualifying mortgage insurance premiums to be treated as deductible qualified residence interest, subject to applicable requirements.

The mortgage insurance contract generally must meet the statutory requirements, including rules relating to when it was issued and the qualifying home acquisition debt.

That doesn't mean every mortgage insurance payment is automatically deductible.

The taxpayer must still satisfy the applicable requirements, including those governing itemization and eligible mortgage debt.

This is especially relevant for borrowers who have conventional private mortgage insurance or other qualifying mortgage insurance arrangements.

However, the exact treatment depends on the type of coverage, mortgage, and taxpayer's circumstances.

If you pay mortgage insurance, ask your tax professional whether the premiums qualify under the 2026 rules.

The IRS discusses the change in Publication 505: Tax Withholding and Estimated Tax (2026).

For a general explanation of why mortgage insurance may be required, see our guide to private mortgage insurance.

6. Can You Deduct Interest on a HELOC or Home Equity Loan?

Sometimes, depending on how the borrowed funds are used.

A home equity loan or home equity line of credit allows an eligible homeowner to borrow money secured by their property.

However, the interest isn't automatically tax-deductible simply because the loan is secured by a home.

Under the applicable federal rules, interest generally must relate to funds used to buy, build, or substantially improve the qualified home securing the debt, subject to other limitations.

For example, borrowing against your home to complete eligible substantial improvements may result in qualifying interest.

Using the same financing to pay ordinary personal expenses or consolidate credit card balances generally doesn't qualify for the home mortgage interest deduction.

The financial terms and tax treatment should be evaluated separately.

A home equity loan or HELOC also creates an obligation secured by the property, which carries repayment risks regardless of whether the interest is deductible.

For additional information, see the IRS's guidance on home equity interest.

7. Can You Deduct Home Improvements or Repairs?

This is another area where homeowners frequently misunderstand the rules.

Ordinary repairs and maintenance on a personal residence generally aren't deductible federal income tax expenses.

For example, routine painting, lawn care, minor repairs, and replacing worn household items usually don't create an immediate personal income tax deduction.

However, certain improvements may affect the property's adjusted tax basis.

What's the Difference Between a Repair and a Capital Improvement?

A repair generally keeps a property in ordinary operating condition.

A capital improvement may increase the property's value, extend its useful life, or adapt it to a different use under applicable tax rules.

For example, certain major additions, structural improvements, or other qualifying projects may increase the home's adjusted tax basis.

That can become important when you eventually sell.

The tax treatment depends on the nature of the work, documentation, property use, and applicable rules.

Not every project marketed as an improvement qualifies for the same treatment.

Why Should You Keep Renovation Records?

If certain capital improvements increase your adjusted tax basis, they may reduce the taxable gain calculated when you sell the home.

That doesn't necessarily provide an immediate deduction in the year you complete the work.

But it can matter later.

For example, if you complete a qualifying addition or significant renovation, maintaining invoices and records may help your tax professional determine how the expense should be treated.

I encourage homeowners to keep documentation of major improvements even if they don't expect to sell in the near future.

The IRS explains these distinctions in Publication 530: Tax Information for Homeowners.

8. Are Home Energy Improvements Eligible for Federal Tax Credits in 2026?

Many older homeowner articles discuss federal energy credits for solar equipment, qualifying windows, insulation, heat pumps, and certain other energy-related improvements.

However, the rules changed.

Federal legislation accelerated the termination of two commonly discussed residential energy tax credits.

Under the updated rules:

• The Energy Efficient Home Improvement Credit generally isn't available for qualifying property placed in service after December 31, 2025.
• The Residential Clean Energy Credit generally isn't available for expenditures made after December 31, 2025.

An energy project that qualified under an earlier year's rules may not qualify in 2026. Check the current rules before assuming a credit applies to work completed or paid for in 2026.

The treatment of prior-year expenditures and certain projects may depend on specific timing and eligibility requirements.

State, local, or utility incentives may also have separate rules, availability, and expiration dates.

Before committing to a project based on a tax incentive, verify the current program with the appropriate tax professional or agency.

You can review the IRS's official energy-credit changes.

9. What Tax Benefits Might Apply When You Sell Your Home?

One of the most significant potential tax benefits associated with homeownership may arise when you sell your primary residence.

Under federal tax law, eligible homeowners may be able to exclude part or all of the gain from selling their main home.

For many qualifying taxpayers, the maximum exclusion is:

• Up to $250,000 for an eligible individual.
• Up to $500,000 for eligible married taxpayers filing jointly.

These are exclusions of qualifying gain, not credits or automatic payments from the government.

The actual benefit depends on the gain realized and whether the homeowner meets the eligibility requirements.

What Are the Ownership and Use Requirements?

Generally, you must satisfy both an ownership test and a use test.

For many eligible sellers, both tests look at the five years ending on the sale date. During that period, the seller must have owned the home for at least two years and used it as a primary residence for at least two years.

The two-year periods don't necessarily have to be consecutive.

Additional restrictions apply, including rules involving prior use of the exclusion.

Special exceptions may apply in certain circumstances.

The requirements for married taxpayers claiming the maximum joint exclusion have additional conditions.

You can review the IRS's home sale tax guidance.

Is the Exclusion Based on Your Home Equity?

No.

Home equity and taxable gain are different calculations.

Your equity generally reflects the property's value minus secured debt.

A home's taxable gain is calculated using tax-basis rules and the amount realized from the sale.

For example, your mortgage balance may affect the cash remaining after closing, but it generally doesn't determine the amount of gain eligible for the home sale exclusion.

This distinction is important because a homeowner can have substantial equity without an equally large taxable gain.

Likewise, a property's increase in market value doesn't automatically equal the gain reported for tax purposes.

For more information about the ownership side of the calculation, read our guide to how home equity works.

10. How Do You Calculate a Home Sale Gain?

The calculation can involve the amount realized from the sale and the property's adjusted tax basis.

Here's a simplified illustration.

Item	Hypothetical amount
Original purchase price	$400,000
Eligible additions to tax basis	$50,000
Adjusted basis in this simplified example	$450,000
Sale price	$650,000
Hypothetical qualifying selling expenses	$30,000
Amount realized after those expenses	$620,000
Illustrative gain	$170,000

This example assumes there are no other adjustments or special circumstances.

If the seller meets the applicable home sale exclusion requirements, the entire illustrative $170,000 gain might be excluded from federal income tax.

However, eligibility and calculation rules need to be confirmed.

The actual mortgage payoff isn't subtracted in calculating this example's taxable gain, even though it would affect the seller's cash proceeds.

Tax treatment can be more complicated when a property has been rented, used for business, inherited, or transferred under special circumstances.

For detailed information, see IRS Publication 523: Selling Your Home.

11. What Homeownership Expenses Usually Aren't Deductible?

One of the most useful things homeowners can understand is which expenses generally don't qualify as personal federal income tax deductions.

Here's an overview.

Expense	General federal tax treatment
Mortgage principal payments	Generally not deductible
Qualified mortgage interest	Potentially deductible when itemizing
Eligible real estate taxes	Potentially deductible within applicable SALT limits
Homeowners insurance	Generally not deductible for a personal residence
Ordinary repairs and maintenance	Generally not immediately deductible
Utilities	Generally not deductible for personal home use
HOA dues	Generally not deductible for a personal residence
Certain mortgage points	May be deductible under specific rules
Certain qualified mortgage insurance premiums	May be deductible under the 2026 rules
Certain capital improvements	May affect adjusted property basis rather than provide an immediate deduction
Ordinary mortgage closing fees	Generally not automatically deductible

Exceptions or different treatment may apply in circumstances involving rental properties, qualifying business use, casualty losses, or specific tax provisions.

For example, the rules for a property held for investment are different from those for a home used entirely as your personal residence.

The important point is not to assume that an expense is deductible simply because it's associated with property ownership.

12. Are Mortgage Closing Costs Tax-Deductible?

Some expenses associated with purchasing a home may receive favorable tax treatment, but most closing costs aren't automatically deductible.

For example, certain eligible prepaid interest, mortgage points, and property tax adjustments may qualify under applicable rules.

Other costs, such as certain title, legal, and recording charges, may be relevant when determining the property's tax basis.

Many lender service fees and other mortgage-related charges generally don't qualify as deductible mortgage interest.

The treatment depends on the specific fee.

This is one reason it's helpful to retain your Closing Disclosure and other settlement documents.

Your tax professional can sort the costs into three groups: deductible amounts, costs added to the property's tax basis, and expenses that qualify for neither treatment.

For more information about the expenses themselves, see our guide to mortgage closing costs.

13. Do Oregon and Washington Homeowners Have Different Tax Considerations?

Federal income tax rules generally apply to eligible taxpayers in both states.

However, state tax systems differ, and those differences can affect the overall financial picture.

Oregon generally imposes a personal state income tax.

Washington doesn't impose a broad individual state income tax, although certain other state and local taxes may apply.

For federal itemized deductions, eligible state income taxes or general sales taxes may be considered under the applicable election and SALT rules, along with eligible real estate taxes.

The appropriate treatment depends on the taxpayer.

For example, a homeowner in Wilsonville, Oregon, may want their tax professional to evaluate how Oregon income taxes and property taxes fit into the federal itemized deduction calculation.

A homeowner in Tacoma, Washington, may have different state and local tax expenses and should review which federal deduction options apply to their circumstances.

Neither example means homeownership will automatically produce a larger tax deduction in one state than the other.

Property-specific expenses, household income, filing status, and individual tax circumstances matter.

State income tax rules also aren't necessarily identical to federal rules.

I recommend discussing both federal and state treatment with a tax professional who understands your situation.

14. What Documents Should Homeowners Keep for Tax Season?

Good recordkeeping can make it easier to review potential tax benefits and prepare for a future sale.

I recommend keeping documents related to the home purchase, mortgage, eligible property expenses, and major improvements.

Homeowner Tax Records Checklist

Document	Why it may be useful
Form 1098, when issued	Reports mortgage interest and certain other mortgage-related information
Closing Disclosure or settlement statement	Identifies purchase expenses, points, and applicable prorations
Property tax statements	Helps document real estate taxes
Escrow account statements	Helps identify property tax disbursements and other payments
Mortgage statements	Documents loan balances and payment activity
Major improvement invoices	May support tax-basis adjustments
Home purchase records	Helps establish original property cost and basis
Home sale closing documents	Helps calculate sale proceeds and potential gain
Prior tax returns and related records	May provide information relevant to deductions or property use

You don't necessarily need to submit every document with your tax return.

However, maintaining accurate records can help support the calculations and any applicable deduction or exclusion.

A tax professional can advise you on which records to preserve and how long they should be retained.

15. Should Tax Benefits Influence Your Homebuying Budget?

Tax considerations can be part of a homebuying decision.

But I don't recommend relying on them to make an otherwise unaffordable mortgage payment seem manageable.

For example, a buyer may estimate that mortgage interest and property tax deductions will offset some of the cost of ownership.

However, the actual benefit could be smaller than expected or nonexistent if the standard deduction is more favorable.

Tax rules may also change during the time you own the property.

Even when deductions apply, they generally reduce taxable income rather than reimburse you dollar for dollar for the expenses.

And your monthly mortgage payment, property taxes, homeowners insurance, and other ownership costs still need to be paid.

My advice: Purchase a home based on a total housing payment that fits your budget under the financing terms available today. Treat any applicable tax benefit as a separate consideration, not a requirement for the purchase to work.

Our article on budgeting for homeownership beyond the mortgage payment explains the additional expenses to consider.

Frequently Asked Questions

What are the tax benefits of owning a home in 2026?

Eligible homeowners may benefit from deductions for qualifying mortgage interest, property taxes, certain points, and certain qualified mortgage insurance premiums. Other potential benefits include the exclusion of eligible gain when selling a primary residence. Actual eligibility depends on the taxpayer and applicable rules.

Can you deduct your entire mortgage payment?

No. Mortgage principal payments generally aren't deductible. Qualifying mortgage interest may be deductible if you itemize and meet the applicable requirements. Other payment components, such as property taxes and mortgage insurance, have separate rules.

Is mortgage interest deductible in 2026?

Yes, for eligible taxpayers who itemize deductions and satisfy the applicable mortgage interest rules. Debt limits and restrictions on how loan proceeds are used may affect the deductible amount.

Are property taxes deductible in Oregon and Washington?

Eligible property taxes may qualify for a federal itemized deduction in either state, subject to the applicable SALT limits. State tax treatment can differ, and the actual benefit depends on the taxpayer's circumstances.

What is the 2026 SALT deduction limit?

For 2026, the general federal limit for eligible combined state and local taxes is $40,400, or $20,200 for married filing separately. The allowable limit is reduced for certain higher-income taxpayers under the applicable rules.

Are mortgage insurance premiums deductible in 2026?

Certain qualified mortgage insurance premiums may be deductible beginning in the 2026 tax year, subject to the applicable requirements. Not every mortgage insurance payment automatically qualifies.

Are renovations or home repairs tax-deductible?

Ordinary personal-home repairs generally aren't deductible. Certain qualifying capital improvements may increase the property's adjusted tax basis, which can affect the calculation of gain when the property is eventually sold.

Can you deduct HELOC interest?

Potentially, if the loan and use of proceeds meet the applicable requirements. Interest on money used to buy, build, or substantially improve the qualified home securing the debt may be deductible. Interest on home equity debt used for unrelated personal expenses generally isn't deductible as qualified home mortgage interest.

Do first-time homebuyers get a federal tax credit?

There isn't a universal federal income tax credit automatically awarded to everyone simply for purchasing a first home. Certain specific programs, credits, or state and local assistance arrangements may apply to eligible buyers, subject to current program rules.

Do you pay federal capital gains tax when selling your primary residence?

Not necessarily. Eligible sellers may be able to exclude up to $250,000 of qualifying gain, or up to $500,000 for eligible married couples filing jointly, if they satisfy the applicable requirements. Gain exceeding the exclusion or subject to special rules may be taxable.

Do you need to itemize to benefit from homeownership tax deductions?

Generally, eligible mortgage interest, property tax, and certain other homeowner deductions are claimed through itemizing. However, the tax treatment of selling a primary residence and other specific provisions may involve separate rules.

Are solar panels or energy-efficient windows eligible for federal tax credits in 2026?

The federal residential clean-energy and energy-efficient home improvement credits were generally terminated for qualifying expenditures or property placed in service after December 31, 2025, under their respective rules. Don't assume that an improvement completed in 2026 qualifies under earlier federal incentives.

The Bottom Line: Understand the Tax Benefits, but Don't Depend on Them

Homeownership can provide certain federal tax benefits, including potential deductions for qualified mortgage interest, property taxes, and other eligible expenses.

There may also be meaningful tax advantages when selling a qualifying primary residence.

However, these benefits depend on individual circumstances, and the rules can change.

After more than 25 years in mortgage lending, I encourage buyers to understand the complete cost of homeownership before making a financial commitment.

Your mortgage payment, property expenses, savings, and long-term goals should guide the purchase decision.

Tax benefits may be part of the financial picture, but they shouldn't be the reason a home appears affordable.

A qualified tax professional can help determine which deductions, credits, or exclusions apply to your particular situation.

At Platinum Lending Solutions, we help buyers and homeowners throughout Oregon and Washington understand mortgage financing, monthly housing expenses, and available loan options.

If you're considering buying, refinancing, or making a change to your existing mortgage, I'm happy to help you review the financing side of the decision.

Ask Stacy Your Mortgage Question

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About the Author

Stacy Schlesinger is the President of Platinum Lending Solutions, an independent mortgage brokerage serving Oregon and Washington. With more than 25 years of mortgage lending experience, Stacy helps homebuyers evaluate financing options and navigate the mortgage process.

Stacy Schlesinger | NMLS #252075

Platinum Lending Solutions | Company NMLS #251560

Oregon License #ML-4475 | Washington License #WA CL-251560

Content reviewed October 31, 2026. This article is provided for general educational purposes and is not individualized tax, legal, or investment advice, a commitment to lend, or an offer of specific mortgage terms. Federal and state tax rules, deductions, credits, and limits are subject to change and depend on individual circumstances. Consult a qualified tax professional regarding your eligibility. Mortgage program availability, rates, costs, and financing terms are subject to applicable lender requirements. All loans are subject to credit approval.