Owning a home comes with more than just a monthly payment. It can also come with tax advantages that many homeowners overlook.
Each year, people file without realizing certain deductions or credits may apply to their mortgage, property taxes, or recent home improvements. Some assume their accountant will automatically catch everything. Others simply don’t know what questions to ask.
Before you file, it’s worth taking a few minutes to review what may apply to your situation. A quick conversation with a qualified tax professional could make a meaningful difference.
Below are several homeowner tax items to have on your radar this season.
Mortgage Interest Deduction
If you itemize your deductions, you may be able to deduct the mortgage interest you paid during the year.
In the early years of a mortgage, a large portion of your monthly payment typically goes toward interest rather than principal. That means the amount of interest paid may be higher than many homeowners expect, which can make it worthwhile to compare itemizing versus taking the standard deduction.
The current limit allows interest deductions on loan balances up to $750,000, or $375,000 if married filing separately. Loans originated before December 15, 2017 may follow different rules.
What to have ready:
- Form 1098 from your loan servicer
- Closing documents if you paid points at closing
For additional details, see IRS Publication 936, Home Mortgage Interest Deduction.
Property Tax Deduction and SALT Limits
Homeowners who itemize may also be able to deduct state and local taxes, including property taxes, under what’s commonly known as the SALT deduction.
For tax years 2025 through 2029, the deduction limit is up to $40,000 for married couples filing jointly and single filers. The deduction begins to phase out once modified adjusted gross income exceeds $500,000.
If you live in an area with higher property taxes, this updated limit may make itemizing worth reviewing, even if you have not itemized in recent years.
Your annual property tax statement and payment records should be included in your tax preparation documents. A quick review with your tax professional can help determine whether this deduction benefits you.
For additional details, refer to the IRS guidance on state and local tax deductions.
Energy Efficiency Tax Credits
If you made improvements to your home this year, you may qualify for a federal tax credit.
Many homeowners focus only on mortgage and property tax deductions and overlook upgrades that could reduce their tax bill. Certain energy-efficient improvements may qualify for a credit worth up to 30 percent of eligible costs.
Qualified upgrades can include insulation, exterior windows and doors, heat pumps, biomass stoves, boilers, and solar panels.
Current annual caps include:
- Up to $1,200 for insulation, windows, and doors
- Up to $2,000 for heat pumps, biomass stoves, or boilers
If you replaced windows, upgraded HVAC, added insulation, or installed solar, make sure those receipts are part of your tax file. These credits reduce your tax liability directly, which can make them especially valuable.
For full eligibility details, review the Energy Star federal tax credit guidelines or speak with your tax professional before filing.
Thinking About Selling? Understand the Capital Gains Exclusion
If you are considering selling your home, it is important to understand how capital gains taxes may apply.
Homeowners who have lived in their primary residence for at least two of the past five years may be able to exclude:
- Up to $250,000 in gains if filing single
- Up to $500,000 in gains if married filing jointly
In markets where home values have appreciated, this exclusion can be significant. However, timing matters. Selling before you meet the residency requirement could change your tax outcome.
If you are thinking about listing your home in the near future, this is a conversation worth having before you put it on the market.
For additional details, see IRS Topic 701, Sale of Your Home.
Homestead Exemption: Don’t Miss the Deadline
If this is your primary residence, make sure you have applied for your homestead exemption.
A homestead exemption reduces the taxable assessed value of your home, which can lower your annual property tax bill. In some states, it may also limit how much your assessed value can increase over time.
It does not happen automatically. You must apply through your county property appraiser or local tax authority, and most states have a filing deadline, often in early spring.
Requirements and deadlines vary by state. To learn more, check out our:
- General Overview: Homestead Exemption Filing Guide
- Florida Guide: Florida Homestead Exemption
Missing the deadline can mean paying higher property taxes for the year, so it is worth confirming your status now.
Coming in 2026: PMI Deductions Return
Under updated tax law, private mortgage insurance premiums will once again be deductible for homeowners who itemize.
If you currently pay PMI, this change could factor into your overall tax planning.
It may also be a smart time to review your loan. As home values increase and balances decrease, some homeowners build enough equity to remove PMI altogether. In many cases, that can lower a monthly payment without refinancing the entire mortgage.
If you are unsure where you stand, a quick equity review can provide clarity.
Have questions about your home, your equity, or your loan?
Tax season is one of the smartest times to take a closer look at your mortgage strategy. Whether you need clarity on deductions, want to review your equity position, or are considering a refinance or future sale, we’re happy to walk through it with you.
Frequently Asked Questions
Can I deduct my mortgage interest if I take the standard deduction?
No. Mortgage interest is only deductible if you itemize your deductions. If you take the standard deduction, you cannot separately deduct mortgage interest.
For some homeowners, especially in the early years of a loan when interest payments are higher, itemizing may be worth reviewing with a tax professional.
What home improvements qualify for federal tax credits?
Certain energy-efficient upgrades may qualify for a federal tax credit. Eligible improvements can include insulation, exterior windows and doors, heat pumps, biomass stoves, boilers, and solar panels. Credits are subject to annual limits and eligibility requirements, so homeowners should review current IRS guidelines or speak with a tax professional before filing.
Do I have to apply for a homestead exemption every year?
In most states, once your homestead exemption is approved, it renews automatically as long as the property remains your primary residence and your eligibility does not change. However, initial applications must be submitted by the deadline, and requirements vary by state and county.
*Ideal Lending is not a tax or financial advisor, and individual tax circumstances may vary. Please consult a licensed tax professional and appropriate government agencies to determine tax consequences of home ownership.
