The 10 Most Common Tax Deductions for Homeowners

Owning a home is the American dream, but it comes with hefty costs like mortgage payments and property taxes. The good news? You could slash your federal tax bill by thousands through common deductions tailored for homeowners. In 2026, with updates like an expanded SALT cap and reinstated PMI deductibility, it's more important than ever to know your options.^[1][2][3]

Whether you're itemizing deductions or running the numbers against the standard deduction—$16,100 for singles and $32,000 for married filing jointly this year—these 10 deductions can make a real difference.^[5] We'll break them down with practical tips to help you maximize savings on your 2026 return, filed in 2027. Always consult a tax pro or use IRS Free File for your situation.

1. Mortgage Interest Deduction

The mortgage interest deduction tops the list as the biggest break for most homeowners. You can deduct interest paid on up to $750,000 of mortgage debt ($375,000 if married filing separately) for your main home and one second home.^[1][3][6]

This applies if you itemize on Schedule A. For example, if your annual interest is $20,000 on a qualifying loan, that's $20,000 off your taxable income in the 22% bracket—saving you $4,400. Track it via Form 1098 from your lender.^[1]

Actionable Tip

Refinancing? Deduct interest on the new loan too, as long as it doesn't exceed the limits. Use the IRS Mortgage Interest Calculator to estimate your savings.

2. Property Taxes (SALT Deduction)

State and local taxes (SALT), including property taxes, are deductible up to the new 2026 cap of $40,000 per household ($20,000 if married filing separately), thanks to the recent "big, beautiful bill" expansion from $10,000.^[3][6]

Average U.S. homeowners pay about $2,800 yearly in property taxes, but high-tax states like New Jersey see $9,000+. Combine with state income or sales taxes for the full cap.^[1]

Actionable Tip

Pay your 2026 property taxes by December 31 to deduct them this year. Check your escrow statement or local tax bill for the exact amount.

3. Mortgage Points

Points—prepaid interest fees to snag a lower rate—are deductible. For purchase mortgages on your primary home, deduct them fully in the year paid if you meet IRS rules like using cash not borrowed funds.^[1][5]

On refinances, spread them over the loan term. A 1-point fee on a $400,000 loan is $4,000—potentially a nice upfront deduction.

Actionable Tip

Review your closing disclosure (Form HUD-1 successor). Seller-paid points might not qualify, so confirm with your CPA.

4. Home Office Deduction

Self-employed? Deduct a portion of home expenses if you use space exclusively and regularly for business. The simplified method is $5 per square foot up to 300 sq ft ($1,500 max); actual method prorates mortgage interest, utilities, and repairs.^[1][2]

For a 200 sq ft office in a 2,000 sq ft home (10%), deduct 10% of $10,000 utilities = $1,000.

Actionable Tip

Measure your space and keep photos/logs. W-2 employees can't claim this post-2017 TCJA.

5. Private Mortgage Insurance (PMI) Deduction

Great news for 2026: PMI premiums are deductible again, made permanent by recent legislation. This covers loans with down payments under 20%.^[2][7]

If you pay $1,500 yearly in PMI, deduct it fully if itemizing, phasing out at higher incomes (check IRS Pub 936 for limits).

Actionable Tip

Your Form 1098 will show PMI. Refinance to drop PMI once you hit 20% equity to save long-term.

6. Home Equity Loan & HELOC Interest

Deduct interest on home equity loans or HELOCs only if funds buy, build, or substantially improve the home securing the loan. Limit ties to overall $750,000 debt.^[1][5][6]

Borrowed $50,000 for a kitchen remodel? Deduct that interest. Used it for a car? No dice.

Actionable Tip

Keep receipts proving improvements. Track with IRS Form 1098-E for interest reporting.

7. Medically Necessary Home Improvements

Costs for accessibility mods like ramps, widened doors, or bathroom grab bars are deductible as medical expenses if exceeding 7.5% of AGI, and they don't add home value.^[1][3]

A $10,000 ramp for a wheelchair qualifies if doctor-prescribed.

Actionable Tip

Get a doctor's note and appraise before/after. Deduct on Schedule A, line for medical.

8. Rental Income Deductions

Rent out a room or basement? Deduct prorated mortgage interest, taxes, insurance, and repairs for the rental portion via Schedule E.^[1]

Airbnb your guest room (20% of home)? Deduct 20% of expenses against rental income.

Actionable Tip

Use short-term rental rules carefully—over 14 days personal use changes it to hobby income.

9. Renewable Energy Tax Credits

Not a deduction but a credit: 30% for solar panels, geothermal, or battery storage via the Residential Clean Energy Credit (no cap through 2032).^[1]

$20,000 solar install = $6,000 credit, reducing tax dollar-for-dollar.

Actionable Tip

File Form 5695. Check EnergyStar.gov for qualified equipment; state rebates may stack.

10. Capital Gains Exclusion on Home Sale

Sell your primary residence? Exclude up to $250,000 gain ($500,000 joint) if owned and lived in 2 of last 5 years.^[1]

Bought for $300,000, sold for $600,000? Pocket $250,000 tax-free (single).

Actionable Tip

Track basis (purchase + improvements). Use IRS Pub 523 for partial exclusions like job moves.

What You Can't Deduct as a Homeowner

Not everything qualifies. Skip insurance premiums, principal payments, HOA fees, utilities (unless home office), repairs, or closing costs beyond points.^[4][6]

• Home insurance
• Mortgage principal
• HOA or condo fees
• Domestic help wages
• Most home repairs

Should You Itemize or Take the Standard Deduction?

Compare totals: If itemized (mortgage interest + SALT + etc.) beats $16,100 single/$32,000 joint, itemize. Use tax software or IRS withholding estimator.^[5]

Only ~10% of filers itemize post-TCJA, but high property tax states benefit most.

FAQ

Do I need to itemize to claim these deductions?

Yes, most require Schedule A itemizing over the standard deduction. Home office and rentals use separate forms.^[6]

What's the SALT cap in 2026?

$40,000 household max for property, state income, or sales taxes.^[3][6]

Can renters claim home office?

Yes, prorated rent/utilities if self-employed and exclusive use.^[1]

Is PMI always deductible?

For 2026, yes if itemizing and within income limits.^[2][7]

How do energy credits work?

30% non-refundable credit for qualified solar/geothermal; carry forward unused.^[1]

What if I work from home as a W-2 employee?

No home office deduction available.^[3]

Next Steps to Claim Your Deductions

Gather Form 1098, property tax bills, and improvement receipts now. Run scenarios in TurboTax or H&R Block software. File by April 15, 2027—or extend to October. For complex cases, visit IRS.gov or a CPA. These breaks could save you $5,000+—don't leave money on the table!

Sources & References

1. Top 10 Tax Deductions for Homeowners in 2026 - DomiDocs — domidocs.com
2. Don't overlook these common tax deductions - H&R Block — hrblock.com
3. Are you a homeowner? Here are some of the tax deductions... - CBS News — cbsnews.com
4. Homeowners: review these house-related deductions and programs - IRS — irs.gov
5. Guide to Tax Deductions for Homeowners in 2025 - SmartAsset — smartasset.com
6. Tax Deductions for Homeowners in 2025 - NerdWallet — nerdwallet.com
7. Mortgage Insurance: Deductible Once Again Starting Tax Year 2026 - USMI — usmi.org