Owning a home comes with tax breaks. But which ones still exist? The Tax Cuts and Jobs Act (TCJA) of 2017 changed many deductions – and those changes are set to expire after 2025. That makes 2025 and 2026 transition years.
In this guide, we cover every homeowner tax deduction still available for 2025‑2026 tax returns: mortgage interest, property taxes, points, energy credits, and home office. We’ll also show you what’s gone (moving expenses, personal casualty losses) and what’s coming after 2025.
Disclaimer: This is for informational purposes. Consult a tax professional for your specific situation.
Mortgage Interest Deduction – Still Alive (But Capped)
What it is: You can deduct interest paid on mortgage debt used to buy, build, or substantially improve your primary or secondary home.
Limits (2025‑2026):
- First $750,000 of mortgage debt (if you bought after Dec 15, 2017)
- First $1,000,000 of mortgage debt (if you bought before Dec 15, 2017 – grandfathered)
Example: You have a $600,000 mortgage at 6% interest. First year interest = $36,000. You can deduct all $36,000 (since $600k is under $750k cap).
What about home equity debt? Under TCJA, interest on home equity loans is deductible only if the funds were used for home improvements. Not for credit card consolidation or car purchases.
Filing status: You must itemize deductions (Schedule A) to claim this. If your total itemized deductions are less than the standard deduction ($14,600 single, $29,200 married in 2025), you won’t benefit.
Pro tip: Many homeowners no longer itemize because the standard deduction doubled under TCJA. Roughly 90% of taxpayers take the standard deduction.
H2: Property Tax Deduction – The $10,000 Cap
What it is: You can deduct state and local property taxes (plus state income or sales tax).
The cap: $10,000 total for all state and local taxes (SALT) combined – property + income + sales tax.
Example: You pay $8,000 in property taxes and $5,000 in state income tax. You can only deduct $10,000 total – not $13,000.
For married couples filing separately: $5,000 cap each.
This cap expires after 2025 unless Congress extends it. For 2026, the cap may rise or disappear. Stay tuned.
Strategy: If your property taxes are high (>$10k), you can’t deduct the excess. Consider prepaying next year’s taxes? Not allowed – IRS prohibits.
Mortgage Points Deduction
What it is: Points are prepaid interest. Each point costs 1% of loan amount and lowers your interest rate.
Deduction rules:
- Purchase loan: Deduct points in full in the year you buy (if points are typical for your area).
- Refinance loan: Deduct points ratably over the life of the loan (e.g., 2 points on a 30‑year loan = 1/30th per year). If you refinance again or sell, deduct remaining points immediately.
Example: You pay $3,000 in points on a $300,000 purchase. Deduct full $3,000 on that year’s taxes.
Pro tip: Seller‑paid points are also deductible – as if you paid them. Keep your closing disclosure (Form HUD‑1) as proof.
Home Office Deduction (For Self‑Employed Only)
If you’re self‑employed (not a W‑2 employee), you can deduct expenses for the portion of your home used regularly and exclusively for business.
Two methods:
Simplified method: $5 per square foot, up to 300 sq ft (max $1,500 deduction). No depreciation recapture when you sell.
Regular method: Deduct actual expenses (mortgage interest, property taxes, utilities, insurance, repairs) multiplied by the percentage of home used for business. Requires calculating depreciation, which is recaptured when you sell.
Eligibility:
- The space must be your principal place of business.
- You must meet clients/customers there OR use it for administrative tasks with no other fixed location.
W‑2 employees: The home office deduction was eliminated for employees under TCJA. You can’t claim it, even if your employer requires remote work.
Energy Efficiency Tax Credits (2025‑2026)
The Inflation Reduction Act expanded energy credits through 2032. These are credits (direct reduction of tax owed), not deductions.
Home energy improvements (25C credit):
- Heat pumps, heat pump water heaters, central AC, furnaces, boilers – 30% of cost, up to $2,000 per year.
- Windows, doors, skylights – 30% of cost, up to $600 per year.
- Insulation, air sealing – 30% of cost, no dollar cap (but limited by overall $1,200 annual cap for building envelope).
Solar and battery storage (25D credit):
- Solar panels, solar water heaters – 30% of cost, no cap.
- Battery storage (3kWh+) – 30% of cost, no cap.
Example: You install $20,000 solar panels. Credit = $6,000. That directly reduces your tax bill by $6,000.
Important: These are non‑refundable credits – they can reduce your tax owed to zero but won’t give you a refund beyond that. Unused credit carries forward.
Capital Gains Exclusion – The Big One
When you sell your primary home, you can exclude up to:
- $250,000 of capital gains (single)
- $500,000 (married filing jointly)
Requirements:
- You owned and lived in the home for at least 2 of the last 5 years.
- You haven’t used the exclusion on another home in the last 2 years.
Example: You bought for $300k, sold for $700k. Gain = $400k. Married couple excludes $500k – so zero tax.
No deduction per se, but this is the largest homeowner tax benefit.
What Deductions Are Gone (For Now)
Under TCJA (through 2025), these are not deductible:
- Moving expenses – Unless you’re active military.
- Personal casualty and theft losses – Unless in a federally declared disaster area.
- Home equity loan interest – Unless used for home improvements.
- Home office for W‑2 employees – Eliminated.
- Tax preparation fees – No longer deductible.
After 2025: Some of these may return if TCJA expires. But Congress may extend the current rules. Monitor in late 2025.
Should You Itemize or Take the Standard Deduction?
For most homeowners, the standard deduction is higher than itemized deductions – especially after the SALT cap.
2025 standard deduction:
- Single: $14,600
- Married filing jointly: $29,200
- Head of household: $21,900
When to itemize: Your mortgage interest + property taxes + state income tax + charitable contributions > standard deduction.
Example – married couple:
- Mortgage interest: $15,000
- Property taxes: $8,000
- State income tax: $7,000 (capped at $10k with property tax)
- Charitable: $3,000
- Total itemized: $15,000 + $10,000 + $3,000 = $28,000 (less than $29,200 standard). Take standard deduction.
Only 10‑15% of homeowners itemize in 2025.
Recordkeeping – What to Save
Keep these documents for at least 7 years:
- Closing disclosure (HUD-1) – shows mortgage interest, points, property taxes.
- Annual mortgage interest statement (Form 1098).
- Property tax bills and proof of payment.
- Receipts for home improvements (they add to your cost basis, reducing capital gains when you sell).
- Energy credit receipts (model numbers, serial numbers, manufacturer certification).
Pro tip: Create a digital folder “Home Tax Documents” and scan everything.
Conclusion
Homeowner tax deductions are less generous than before TCJA, but they still exist. The mortgage interest deduction helps those with large loans who itemize. The property tax deduction is capped at $10,000. Energy credits are generous through 2032. And the capital gains exclusion remains the biggest benefit.
Your next step: Run the numbers. If your itemized deductions are close to the standard deduction, consider “bunching” – prepay property taxes or charitable donations in alternating years to exceed the threshold every other year.
Need tax advice? Countrywide Collective can refer you to CPAs who specialize in real estate tax planning.
