Tax deductions for homeowners: 9 breaks to know in 2026

Homeownership comes with substantial costs like mortgage payments, property taxes, insurance, and maintenance costs. The good news is that the federal government offers tax deductions and credits specifically designed to help offset these expenses. By understanding which deductions you qualify for, you can reduce your tax liability. Your eligibility depends on your individual circumstances and tax filing approach, so this article provides an overview of common homeowner deductions, expenses that don't qualify, and other tax benefits worth knowing about. Read on to explore nine deductions available to homeowners and learn which tax breaks might apply to your situation.

Key takeaways:

• Homeownership can come with valuable tax deductions, such as mortgage interest and property taxes, which can help lower overall federal income tax liability.
• Routine maintenance, homeowners insurance, and HOA fees generally don’t qualify, so it’s important to understand which expenses the IRS allows.
• To benefit from homeowner tax deductions, you must itemize rather than take the standard deduction, making it helpful to compare both options when filing.

Standard vs. itemized deductions

When you prepare your income tax return, you have a choice between the standard deduction and itemized deductions. Most of the tax breaks available to homeowners require you to itemize your deductions.

Itemizing your deductions means that you calculate exactly how much money you spent on each thing that is eligible for a deduction, then subtract that amount from your income to determine your taxable income.

The standard deduction is a flat amount that you can deduct from your taxes without having to calculate specific expenses. That makes it much easier than itemizing.

The standard deduction depends on your filing status:

• Standard deduction for single filers: $16,100
• Standard deduction for married couples filing jointly: $32,200
• Standard deduction for married individuals filing separately: $16,100
• Standard deduction for heads of households: $24,150

Both types of deductions reduce your taxable income, meaning you pay less tax. You typically can choose only one - itemizing or taking the standard deduction, so it’s only worth itemizing if your total itemized deductions exceed the standard deduction you’re eligible for.

When itemizing may make sense

Keep in mind that you can only choose one method – you cannot take the standard deduction and itemize. So, it generally only makes sense to itemize if your total eligible itemized deductions exceed the standard deduction amount for your filing status. Homeowners who recently took out a large mortgage or who live in areas with high property taxes often find that their deductible housing expenses push their itemized total well past the standard deduction threshold, saving them more money in the long run.

Forms homeowners may need

If you decide that itemizing provides the best financial benefit, you will need to file your return using IRS Form 1040 Schedule A. To accurately report your deductible mortgage interest and property taxes paid through escrow, you will also need IRS Form 1098. This is a document your mortgage lender or servicer will mail to you at the beginning of the year detailing exactly how much interest you paid. Always keep detailed records and verify your eligibility before filing.

Tax deductions vs. tax credits

It is important to know the difference between deductions and credits, as they impact your tax bill in very different ways.

What a tax deduction does

A tax deduction reduces your total taxable income. For example, if you earned $80,000 in a year and claim $15,000 in eligible tax deductions, the IRS will only calculate your federal income tax based on $65,000.

What a tax credit does

Instead of lowering your taxable income, a tax credit provides a direct, dollar-for-dollar reduction of your actual tax liability. If your final tax bill is $4,000 and you qualify for a $1,000 tax credit, your bill is reduced to $3,000. Because they function differently, deductions and credits should not be described as the same benefit.

9 tax deductions for homeowners

There are several tax breaks for homeowners, but these benefits come with rules and restrictions. We'll cover some of the significant tax benefits for homeowners.

1.  Mortgage interest deduction

The mortgage interest deduction allows you to deduct the cost of interest for mortgages used to buy, build, or substantially improve a home. When you first take out a mortgage, most of what you pay your lender is home mortgage interest, and that amount is deductible. This rule applies to all primary mortgages and applies to second mortgages only if the money you borrow is used for specific purposes.

Deductions are only allowed on up to the first $750,000 of mortgage debt for most filers, half that if you’re married filing separately. Your lender will issue IRS Form 1098 detailing the exact amount to enter on your return.

2.  Home equity loan or HELOC interest

A home equity loan¹ is a type of loan secured by the equity you've built in your home. It's often referred to as a second mortgage. Home equity lines of credit also are secured by equity, but you borrow money as needed up to a maximum amount. Rocket Mortgage doesn't currently offer HELOCs.

You can deduct the interest you pay on these loans up to the $750,000 balance limit. However, the IRS rule is that funds from the loan must be used to buy, build, or substantially improve the home. For loans issued before 2017, any home equity loan or HELOC is eligible for this deduction.

3.  Discount points

Discount points, also known as mortgage points, allow you to prepay a portion of the interest on your mortgagee. Most lenders let you buy points when you close on your loan, and each point or fraction of a point you buy reduces the interest rate on your loan.

Because points are a form of interest, you can deduct the cost of discount points. Keep in mind that other loan fees or closing costs, like origination fees, are not deductible.

Depending on your specific loan structure and whether the home is your primary residence, you can either deduct them evenly over the life of the loan or sometimes deduct them in full for the year they were paid.

4.  Property taxes

The IRS allows taxpayers to deduct the cost of paying state and local taxes (SALT). This can include state income taxes and local property taxes. If you live in a high-cost or high-tax area, such as New York or California, this deduction can be substantial.

For 2026, you are limited to deducting a maximum of $40,400 in SALT if you're filing as a single taxpayer, married filing jointly, a qualifying surviving spouse, or head of household.

Keep in mind that taxes paid through an escrow account are deductible in the year the lender pays the tax authority, not when you deposit the monthly funds into your escrow account.

5.  Necessary home improvements

In some instances, a necessary home improvement may be deductible. Routine cosmetic improvements like remodeling a kitchen or finishing a basement for entertainment are not tax-deductible. Instead, the deduction is for people who need to make their home safe and accessible.

Necessary home improvements may qualify as a deductible medical expense if they are installed to accommodate a disability or medical condition for you, your spouse, or a dependent. For example, adding railways, widening doorways for handicap access, or installing medical equipment are likely to qualify for a deduction.

6.  Home office expenses

If you operate a business out of your home, you can take a deduction for your home office costs.

To qualify, you need to use that part of your home regularly and exclusively for business purposes. You can’t deduct costs related to your dining room just because you held a business meeting there once. You also don’t qualify for the deduction if you work from home for another employer.

The amount of the deduction is based on the size of the space dedicated to your home office as compared to the overall size of your home. You can take the simplified option of $5 per square foot of up to 300 square feet of office space for a maximum of $1,500. Another option is to find the percentage of your home’s square footage that is dedicated to the home office and deduct that percentage of the cost of things like mortgage payments, utility payments, and insurance.

7.  Capital gains exclusion

When you sell your home, you may sell it for more than you originally paid for it. If the home was your primary home, you can deduct a portion of the capital gains you receive, reducing how much you pay in capital gains taxes.

To qualify, you must meet both the ownership test and use test, meaning you must have owned and used the home as your primary residence for at least two out of the last five years.

If you qualify, you can exclude $250,000 of capital gains if filing as single and $500,000 if married, filing jointly, when you file your tax return after selling the property.

8.  Rental income expenses

If you have rental income from a rental property or rent out part of your home, you may incur some tax-deductible expenses.

For example, if you rent a room in your home or rent a whole property, you can deduct some or all the cost of property taxes, mortgage interest, utilities, or maintenance as a business expense.

Consult the IRS website for rules and guidance, as making sure you are eligible to take the deduction can be complicated.

9.  Private mortgage insurance

Private mortgage insurance (PMI) is an added monthly cost for buyers who put down less than 20% on a conventional loan. While the PMI deduction officially expired for several years after the 2021 tax year, it is now once again deductible beginning in the 2026 tax year.

Other homeowner tax credits and benefits to know

If you own your home, there are a few credits that can help you reduce your tax bill dollar-for-dollar.

Residential clean energy credit

This is a valuable tax credit that rewards homeowners for making environmentally friendly upgrades. You can claim a credit covering up to 30% of the installation cost for qualified residential clean energy property, including solar panels, wind turbines, geothermal heat pumps, and battery storage technology.

Mortgage Interest Credit

This credit is designed to help lower-income individuals afford homeownership. To qualify, you must be issued a Mortgage Credit Certificate (MCC) by a state or local housing finance agency when you purchase your home. This certificate allows you to claim a federal tax credit for a specific percentage of the mortgage interest you pay each year.

Nondeductible home expenses

Though the IRS offers many deductions for home-related expenses, there are just as many that are ineligible for deductions. You should be aware of some nondeductible home expenses, including:

• Fire insurance premiums
• Homeowners insurance premiums
• The principal amount of your mortgage payment
• HOA fees
• Depreciation
• Utilities, including gas, electricity, and water (unless you rent out part of your home)
• Down payment
• Appraisal fee

FAQ

Here are the answers to some frequently asked questions about tax deductions for homeowners.

What kind of tax deductions are available for homeowners?

The primary federal tax deductions available for homeowners include the mortgage interest deduction on up to $750,000, state and local property taxes, mortgage discount points, interest on qualifying home equity loans or HELOCs, and qualifying home office expenses.

What is the most overlooked tax break?

One of the most overlooked tax breaks is the deduction for discount points paid at closing, as many homeowners forget to include these upfront fees when tallying their expenses for the year. Another frequent oversight is not tracking the exact timing of property taxes paid out of an escrow account.

Are HOA fees tax deductible?

No. Homeowners association (HOA) fees are strictly non-deductible for primary residences. Unless the home is actively used as a rental property to generate business income, you cannot write off your monthly or annual HOA dues.

Is homeowners insurance tax deductible?

Homeowners insurance premiums, fire insurance, and title insurance are not deductible for your primary residence. The only exception is if you are claiming the home office deduction or treating the home as a rental property, in which case you can deduct a proportional share of your insurance costs as a business expense.

Are mortgage payments tax-deductible?

Your total monthly mortgage payment is not fully tax-deductible. While you can potentially deduct the qualifying mortgage interest portion of your payment, the principal amount is never deductible.

Can you deduct discount points on your taxes?

Yes, because the IRS considers mortgage discount points to be prepaid interest, they are generally deductible on a primary residence. You may deduct them incrementally over the life of the loan or, in some specific cases, entirely in the year they were paid.

The bottom line: Explore your tax benefits as a homeowner

Tax deductions can help make owning a home more affordable. Before using tax deductions, check to make sure the amount you can deduct by itemizing is more than you’d get by using the standard deductions.

If you’re ready to learn more about taxes related to homeownership, Rocket Mortgage has resources available.

This article is for informational purposes only, and is not a substitute for professional advice from a medical provider, licensed attorney, financial advisor, or tax professional. Consumers should independently verify any service mentioned will meet their needs.