Homeownership is a significant financial investment, and the U.S. tax code offers numerous ways to recoup some of those costs. In 2026, homeowners can leverage a range of deductions and credits, from mortgage interest to energy-efficient upgrades, to reduce their tax liability. Failing to claim these benefits means leaving money on the table – effectively donating it back to the government. This guide breaks down the essential tax breaks available, ensuring you maximize your return.
How Homeowner Tax Breaks Work
Most federal income tax benefits for homeowners are tax deductions, which lower your taxable income. The less income taxed, the less you pay. When filing, you must choose between itemizing deductions (using Form 1040 Schedule A) or taking the standard deduction ($15,750 for single filers, $31,500 for joint filers in 2025). Itemizing is beneficial only if your total deductions exceed the standard amount.
Tax credits directly reduce your tax bill and don’t require itemization. This makes them valuable regardless of your filing method.
Key Deductions and Credits
Mortgage Interest Deduction
One of the most substantial homeowner tax breaks, this deduction allows you to deduct interest paid on your home loan. For loans up to $750,000 (or $1 million for pre-December 15, 2017 mortgages), the full amount is deductible. Married couples filing separately can deduct half these amounts. You’ll receive Form 1098 from your lender, which you’ll use to complete Line 8 of Schedule A.
Mortgage Points
If you paid points (discount points) at closing to lower your interest rate, these are also deductible as prepaid interest. Include the amount on Line 8 of Schedule A alongside your mortgage interest.
Mortgage Credit Certificates (MCCs)
First-time homebuyers may qualify for MCCs from state or local governments. These certificates provide a direct tax credit based on a percentage of your mortgage interest payments (typically 10-50%, up to $2,000). File Form 8396 to claim this credit.
Property Taxes
Property taxes are deductible, with a cap of $40,000 due to recent legislative changes. Track your payments (often found in Box 10 of Form 1098) and enter the amount on Line 5b of Schedule A.
Home Office Deduction
If you use part of your home exclusively and regularly for business, you can deduct related expenses using Form 8829. The standard method allows $5 per square foot (up to 300 square feet). The regular method requires calculating the business-use percentage of your home. This deduction is generally not available to remote employees unless certain exceptions apply.
Energy-Efficiency Tax Credits
Tax credits for energy-efficient home improvements are expiring after 2025. Take advantage while you can:
- Residential Clean Energy Credit: 30% credit for solar, wind, geothermal, and biomass energy systems.
- Energy-Efficient Home Improvement Credit: Up to $300 for certified heat pumps, water heaters, and furnaces, and 10% for insulation, roofing, and windows. Use Form 5695 to claim these credits.
Electric Vehicle Charging Stations
Install an EV charger? You can claim a 30% tax credit up to $1,000. File Form 8911. This credit expires June 30, 2026.
Home Equity Loan Interest
Interest on home equity loans is deductible if the funds are used for home improvements. Deduct on Line 8 of Schedule A, subject to the same loan limits as regular mortgages.
Capital Gains Exclusion
When selling your home, you may exclude up to $500,000 in profit (married filing jointly) or $250,000 (single) if you lived there for at least two of the past five years. Report on Form 8949.
Medical Home Improvements
Improvements made for medical reasons (ramps, grab bars, wider doorways) can be included in your medical expense deductions if they exceed 7.5% of your adjusted gross income. Include costs on Line 1 of Schedule A.
Expenses That Aren’t Deductible
Certain home-related expenses don’t qualify for tax breaks:
- Down payments
- Principal mortgage payments
- Utility bills
- Homeowner’s insurance
- Routine maintenance (cleaning, lawn care)
- Home depreciation
Conclusion
Navigating homeowner tax breaks requires diligence, but the potential savings are substantial. By understanding these deductions and credits, you can significantly reduce your tax burden and recoup some of your investment in homeownership. Staying informed about changing tax laws is crucial to maximizing these benefits each year.
