10 Best Tax Breaks for Homeowners – Owning a home in the USA is one of the biggest investments most Americans make, but it also unlocks valuable tax breaks for homeowners that can save you thousands each year. From the mortgage interest deduction to energy credits and property tax relief, these homeowner tax deductions and credits help offset costs like loan payments, repairs, and upgrades.
For tax year 2025 (returns filed in 2026), many of these benefits remain strong thanks to updates from recent tax legislation, including a higher SALT deduction cap. Most require itemizing deductions on Schedule A (Form 1040) instead of taking the standard deduction. Always keep records like Form 1098 and consult a tax professional or IRS.gov for your specific situation, as rules can depend on filing status, income, and home use.
Here are the 10 best tax breaks for homeowners in 2026, ranked by potential impact for the average U.S. homeowner.
1. Mortgage Interest Deduction
The mortgage interest deduction is often the largest tax break for homeowners. You can deduct interest paid on up to $750,000 of qualified home acquisition debt ($375,000 if married filing separately) for loans taken out after December 15, 2017. Higher limits ($1 million/$500,000) apply to older mortgages incurred before that date.
This applies to your main home and one second home. Report it on Schedule A using amounts from Form 1098. Early in the loan, most of your payment is interest, making this deduction especially powerful for recent buyers.
2. Property Tax Deduction (SALT Relief)
Homeowners can deduct state and local real estate taxes as part of the SALT deduction. The cap increased to $40,000 ($20,000 if married filing separately) for tax years 2025–2029, with phaseouts for higher incomes.
This includes taxes on your primary residence and second home. Combine it with state income or sales taxes, but not both. It’s a major win for homeowners in high-tax states.
3. Deduction for Mortgage Discount Points
If you paid points to lower your mortgage rate at closing (or on a refinance), you may deduct them in the year paid or spread them over the loan term. Points must meet IRS tests: they’re for your main home, charged as a percentage of the principal, and paid in cash at closing.
This acts like prepaid interest and can provide an immediate tax break for buyers or refinancers.
4. Home Equity Loan or HELOC Interest Deduction
Interest on home equity loans or HELOCs is deductible if the proceeds are used to buy, build, or substantially improve your home (the one securing the loan). The debt limit follows the same $750,000/$375,000 rules as the primary mortgage.
This break rewards using borrowed funds for home improvements rather than other expenses.
5. Residential Clean Energy Tax Credit
Homeowners who installed solar panels, wind turbines, geothermal systems, or battery storage in 2025 can claim a 30% credit on qualified costs (no upper limit). The credit was available through December 31, 2025.
Claim it on Form 5695. It’s non-refundable but reduces your tax bill dollar-for-dollar and is one of the most generous credits for eco-friendly upgrades.
6. Energy-Efficient Home Improvement Credit
You could claim up to $1,200 (or more for specific items like heat pumps) for energy-efficient windows, doors, insulation, or HVAC upgrades placed in service through December 31, 2025.
This credit is also claimed on Form 5695 and rewards practical efficiency improvements that lower utility bills.
7. Home Office Deduction (for Self-Employed Homeowners)
If you use part of your home exclusively and regularly for business (as a self-employed freelancer or small business owner), deduct a portion of mortgage interest, property taxes, utilities, and repairs. Use the simplified method ($5 per square foot, up to 300 sq ft) or actual expenses via Form 8829.
Employees cannot claim this—only those with qualified business use.
8. Deduction for Medically Necessary Home Improvements
Improvements made for medical reasons (e.g., ramps, widened doorways, grab bars, or lowered counters for a household member with a disability) can be deducted as medical expenses on Schedule A if they exceed 7.5% of your adjusted gross income. Only the amount exceeding any increase in home value qualifies.
See IRS Publication 502 for details.
9. Mortgage Interest Credit (via Mortgage Credit Certificate)
Lower-income first-time buyers who receive a Mortgage Credit Certificate (MCC) from a state or local government can claim a tax credit for a portion of their mortgage interest each year (up to a $2,000 annual cap in some cases).
This is in addition to the interest deduction (with adjustments) and helps make homeownership more affordable.
10. Capital Gains Tax Exclusion on Home Sale
When you sell your primary residence, you can exclude up to $250,000 of gain ($500,000 if married filing jointly) if you lived there for at least 2 of the last 5 years. This is one of the most powerful long-term tax breaks for homeowners.
Track your home’s adjusted basis (purchase price + improvements) to calculate the gain accurately.
Maximize your homeowner tax savings in 2026
These tax breaks for homeowners can significantly reduce your federal tax bill, but they require good record-keeping and often itemizing. Energy credits have largely phased out after 2025, while the higher SALT cap and permanent mortgage interest limits provide ongoing relief.
Review your situation with tax software or a CPA, and visit IRS Publication 530 (Tax Information for Homeowners) and Publication 936 (Home Mortgage Interest Deduction) for the latest details. Small planning steps now can lead to big refunds later.