Homeowner Tax Deductions: Mortgage Interest, Property Taxes and the SALT Cap
What You’ll Learn
- Why homeowner tax deductions only help if itemizing beats the standard deduction
- How the mortgage interest deduction and its acquisition debt limit work, including home equity loans
- How property taxes fit under the SALT cap, including the income-based phase-down and scheduled end
- When mortgage insurance premiums become deductible again and what limits apply
- Which records to keep and which IRS publications to check before you file
Homeowner tax deductions can lower your federal income tax, but only if you itemize, and the rules changed again under a federal tax law signed in July 2025 that is commonly called the One Big Beautiful Bill Act. This guide explains how the main deductions work for mortgage interest, points, property taxes and mortgage insurance, what changed, and which IRS publications to check before you file.
This is general education, not tax advice. Your income, filing status and the details of your loan all matter, and tax rules can change. Dollar figures below are labeled with the tax year they apply to. A tax professional can tell you what applies to your return.
Homeowner Tax Deductions Start With One Choice: Itemize or Not
Most of the deductions in this article are itemized deductions, claimed on Schedule A of Form 1040. Each year you generally choose between itemizing and taking the standard deduction. According to the IRS Schedule A instructions, in most cases your federal income tax will be lower if you take whichever is larger.
That means owning a home doesn't automatically create a tax break. If your mortgage interest, deductible state and local taxes and other itemized deductions add up to less than your standard deduction, itemizing generally won't lower your tax.
For reference, the IRS lists these standard deduction amounts:
- Tax year 2025: $15,750 for single filers and married filing separately, $31,500 for married filing jointly, and $23,625 for head of household.
- Tax year 2026: $16,100 for single filers and married filing separately, $32,200 for married filing jointly, and $24,150 for head of household, according to the IRS tax year 2026 inflation adjustments.
Some taxpayers qualify for additional standard deduction amounts. The IRS explains who qualifies and how much.
How the Mortgage Interest Deduction Works
If you itemize, you can generally deduct interest on a mortgage secured by your main home or a second home, within limits. IRS Publication 936, Home Mortgage Interest Deduction, is the main reference.
The acquisition debt limit
For mortgage debt taken out after December 15, 2017, you can generally deduct interest on the first $750,000 of home acquisition debt ($375,000 if married filing separately). Acquisition debt is money borrowed to buy, build or substantially improve the home that secures the loan.
This limit had been scheduled to expire after 2025. The July 2025 law made it permanent, so it continues to apply for tax year 2026 and later unless Congress changes it.
Older loans can follow different rules. Debt taken out before December 16, 2017, generally falls under a higher limit of $1 million ($500,000 if married filing separately). Pub. 936 explains how older loans, refinances and more than one mortgage are counted together.
Home equity loans and lines of credit
Interest on a home equity loan or line of credit is generally deductible only to the extent the money was used to buy, build or substantially improve the home that secures it. Interest on money used for other purposes, such as paying off credit cards or buying a car, generally isn't deductible as home mortgage interest. The 2025 law made this treatment permanent too.
The year-end interest statement
Your lender or loan servicer generally sends Form 1098 by January 31. It shows the mortgage interest you paid the previous year and often the points you paid. Pub. 936 notes that the form may include points you can't fully deduct, so compare it with your own records.
Points Paid at Closing
Points are amounts paid to get a mortgage, often to get a lower interest rate, and they're generally treated as prepaid interest. Their tax treatment depends on the loan and how the points were paid:
- As a general rule, Pub. 936 says you can't deduct the full amount of points in the year paid. Instead, they're generally deducted over the life of the loan.
- Points on a loan used to buy or build your main home can often be deducted in full in the year paid, if a list of IRS tests is met.
- Points on a second home loan, and generally on a refinance, are deducted over the life of the loan.
Your Closing Disclosure shows any points you paid. Keep it with your tax records, and ask a tax professional how the IRS tests apply to your loan.
Property Taxes and the SALT Cap
If you itemize, state and local real estate taxes on your home can be deducted. They share one combined limit with state and local income taxes (or general sales taxes, if you choose those instead) and personal property taxes. This combined limit is often called the SALT cap, for state and local taxes.
How large the cap is
- Tax years 2018 through 2024: $10,000 ($5,000 if married filing separately).
- Tax year 2025: $40,000 ($20,000 if married filing separately), according to the IRS Schedule A instructions.
- Tax year 2026: $40,400 ($20,200 if married filing separately), according to an IRS correction notice for the 2026 Form 1040-ES. Check the tax year 2026 Schedule A instructions when they're released.
- Tax years 2027 through 2029: scheduled to rise 1% each year.
- Tax year 2030 and later: scheduled to return to $10,000 ($5,000 if married filing separately) unless Congress changes the law.
The income-based phase-down
The higher cap shrinks at higher incomes. For tax year 2025, if your modified adjusted gross income is over $500,000 ($250,000 if married filing separately), the cap is reduced by 30% of the amount over that threshold. It can't drop below $10,000 ($5,000 if married filing separately), so at a modified adjusted gross income of $600,000 or more, the tax year 2025 cap is back to $10,000.
For tax year 2026, the IRS lists the income threshold as $505,000 ($252,500 if married filing separately), with the same $10,000 ($5,000) floor. The threshold is scheduled to rise 1% each year through 2029. The Schedule A instructions include a worksheet for figuring the reduced cap.
What counts as a deductible property tax
IRS Publication 530, Tax Information for Homeowners, covers the details. A few points that often come up:
- A real estate tax is generally deductible only if it's assessed uniformly at a like rate on all real property in the community.
- Charges for local benefits that tend to increase your property's value, such as new sidewalks, generally aren't deductible. They're added to your home's basis instead.
- If your property taxes are paid through an escrow account, you deduct only the taxes your lender actually paid to the taxing authority during the year, not the amount you deposited into escrow.
- In the year you buy or sell, real estate taxes are generally divided between buyer and seller based on the date of sale. Your Closing Disclosure shows how they were split.
Lowering the tax bill itself is a separate question from deducting it. Many states and counties offer programs such as a homestead exemption, and if you think your assessment is off, see when a property tax assessment appeal makes sense.
The SALT cap is one combined limit. Property taxes and state income or sales taxes share it.
Mortgage Insurance Premiums: Back Starting With Tax Year 2026
The itemized deduction for mortgage insurance premiums expired after tax year 2021. IRS Pub. 936 for tax year 2025 says it can no longer be claimed, and line 8d of the tax year 2025 Schedule A is marked reserved.
The July 2025 law brings it back. Starting with tax year 2026, certain mortgage insurance premiums on home acquisition debt are treated as deductible mortgage interest for people who itemize. A few points to know:
- Income limits apply. The deduction phases out as adjusted gross income rises above a set level and isn't available at all above a higher level.
- It only helps if you itemize.
- Which premiums qualify, and how they're reported, will be spelled out in IRS forms and instructions for tax year 2026. Check the current Pub. 936 before you file.
Mortgage insurance is a cost of the loan whether or not you can deduct it. For how it works on a conventional loan and when it can end, see private mortgage insurance and how to drop it.
Other Homeowner Tax Items to Know
Home energy credits have ended
According to Pub. 530, you can't claim the energy efficient home improvement credit for property placed in service after December 31, 2025. The residential clean energy credit also ends for expenditures made after that date. Projects completed earlier may still matter on an earlier year's return.
Mortgage credit certificates
Some state and local housing agencies issue mortgage credit certificates. If you have a qualified certificate, Pub. 530 explains that you can claim a credit each year on Form 8396 for part of the mortgage interest you pay. A certificate generally must be issued before you buy.
A limit for the highest tax bracket
Starting with tax year 2026, the IRS notes that the 2025 law limits the tax benefit of itemized deductions for taxpayers in the highest tax bracket. If your income is in that range, a tax professional can show you how it affects your return.
Common home costs that generally aren't deductible
Pub. 530 lists several costs of owning a personal home that generally aren't deductible, including:
- Homeowners insurance premiums, including fire and comprehensive coverage, and title insurance
- Homeowners association fees, condominium association fees and common charges
- Transfer taxes on the sale of a personal home
- The principal portion of your mortgage payment
Some of these, such as certain settlement costs and improvements, may affect your home's basis, which can matter when you sell. Selling has its own rules, covered in IRS Publication 523.
Records That Support Your Homeowner Tax Deductions
Good records make it easier to claim what you're entitled to and to answer questions later. Pub. 530 also notes that you must keep records of events that affect your home's basis. A useful file often includes:
- Your Closing Disclosure from the purchase and any refinance
- Form 1098 from your lender or servicer each year
- Property tax bills and proof of payment, plus escrow account statements
- Receipts and invoices for improvements
- Any mortgage credit certificate and related paperwork
For a broader checklist of what to keep and for how long, see home records: what to keep.
Frequently Asked Questions
Can I deduct mortgage interest if I take the standard deduction?
Generally, no. Mortgage interest, property taxes and mortgage insurance premiums are itemized deductions. If you take the standard deduction, you generally can't also claim them.
Is homeowners insurance tax deductible?
For a personal home, generally not. Pub. 530 lists homeowners insurance among the costs you can't deduct. Rules can differ for rental or business use of a property.
Can I deduct PMI on my tax year 2025 return?
According to IRS Pub. 936 for tax year 2025, no. The deduction returns starting with tax year 2026, subject to income limits and the itemizing requirement.
Will the SALT cap change again?
Under current law, the higher cap is scheduled to rise slightly each year through tax year 2029 and return to $10,000 starting with tax year 2030. Congress can change tax law at any time, so check current IRS guidance each year.
Do property taxes paid at closing count?
Often, for the portion of the year you owned the home. Real estate taxes are generally divided between buyer and seller based on the date of sale. Your Closing Disclosure and Pub. 530 can help you and a tax professional sort out your share.
The Bottom Line
Homeowner tax deductions are real, but they only help when itemizing beats the standard deduction. Under current federal law, the mortgage interest limit for newer loans is permanent, the SALT cap is higher through tax year 2029 with a phase-down at higher incomes, and mortgage insurance premiums become deductible again starting with tax year 2026. Keep your closing papers, lender statements and tax bills, check the current IRS publications each year, and talk with a tax professional about your own return.
This article is general information, not tax, legal or financial advice. Tax laws change, and how they apply depends on your income, filing status and situation. Figures are labeled with the tax year they apply to and reflect IRS publications and tax sources available at the time of writing. Talk with a tax professional about your specific situation. Advice4Homeownership is a publisher, not a tax advisor or lender.
