Tax Deductions for Homeowners 2026: SALT, Mortgage Interest, PMI
Key 2026 homeowner deductions: mortgage interest (up to $750K debt), SALT cap raised to $40,000, PMI premiums restored, and home office ($5/sq ft, max $1,500). Itemize if your mortgage exceeds ~$250,000 — otherwise the $32,000 standard deduction (MFJ) wins.
Tax Deductions for Homeowners Buying Guide
Photo by Nataliya Vaitkevich / PexelsHomeowner Tax Deductions in 2026: What Changed
Two significant changes benefit homeowners in the 2025 tax year (filed April 2026):
- SALT cap raised to $40,000 (from $10,000) for 2025–2029 under the One Big Beautiful Bill Act
- PMI deduction restored — private mortgage insurance premiums are deductible again starting with the 2025 tax year
The standard deduction for 2026 is $16,100 (single) and $32,000 (married filing jointly). Most homeowners with a mortgage will benefit from itemizing if their deductible expenses exceed these thresholds.
Mortgage Interest Deduction
You can deduct interest paid on mortgage debt up to $750,000 for loans taken out after December 15, 2017. Older loans (pre-December 16, 2017) have a $1,000,000 limit. This limit applies to your primary residence and one second home combined.
Your lender sends Form 1098 in January showing mortgage interest paid. Enter this directly into your tax software. If you paid points when you got your mortgage in 2025, those points may be deductible in the year paid (for your primary residence).
Home equity loan interest is only deductible if the loan was used to "buy, build, or substantially improve" your home — not for personal expenses, debt consolidation, or other purposes.
SALT Deduction: Cap Raised to $40,000
The state and local tax (SALT) deduction cap was raised from $10,000 to $40,000 for tax years 2025–2029. This is a major change for taxpayers in high-tax states (California, New York, New Jersey, Illinois, Massachusetts).
SALT includes: state income tax OR state sales tax (whichever is larger), plus property taxes. Most homeowners in high-tax states will hit the new $40,000 cap if they add up property taxes and state income tax — but the cap still applies per return, not per person.
If you paid $25,000 in property taxes plus $20,000 in state income tax, you can deduct $40,000 (not $45,000) — the cap applies to the combined total.
PMI Deduction Restored (2025 Tax Year)
Private mortgage insurance (PMI) premiums are deductible as mortgage interest starting with the 2025 tax year. If you pay PMI because your down payment was less than 20%, look for this amount on your Form 1098 or in a separate statement from your servicer.
The PMI deduction phases out above $109,000 AGI (single) and is eliminated above $109,000. This primarily helps first-time buyers and those who haven't yet reached 20% equity.
Home Office Deduction
If you work from home as a self-employed person (not a W-2 employee — the home office deduction was eliminated for employees in 2018), you can deduct the business-use portion of your home:
- Simplified method: $5/sq ft × dedicated home office space (max 300 sq ft = $1,500 maximum deduction)
- Regular method: (home office sq ft ÷ total home sq ft) × actual home expenses (mortgage interest, property taxes, utilities, insurance, repairs)
The regular method is usually larger but requires tracking all home expenses. The simplified method is faster and avoids depreciation recapture when you sell the home. Most tax software lets you calculate both and choose the larger one.
Home Sale Capital Gains Exclusion
If you sell your primary residence, you can exclude up to $250,000 in capital gains (single) or $500,000 (MFJ) from taxable income — provided you lived in the home for at least 2 of the past 5 years. This exclusion is not a deduction but a tax-free gain.
Cost basis includes the purchase price plus qualifying improvements (additions, kitchen remodels, new roof, HVAC). Keep receipts for all major improvements to document your adjusted basis at sale time.
Which Software Handles Homeowner Deductions Best
TurboTax Deluxe ($89) has the most thorough homeowner interview — walks through every deduction category with explanatory text. It will import your Form 1098 data if you connect your mortgage servicer account. Best for first-time homeowners or complex situations (rental income from a room, home office).
H&R Block Deluxe ($35) handles all homeowner deductions at a significantly lower price. Less hand-holding than TurboTax but covers everything. Good option if you're comfortable with itemization basics.
TaxAct Online ($75) is a solid mid-range option. Itemization interview is complete and accurate, though less visually polished than TurboTax.
FreeTaxUSA ($0 federal) supports all homeowner deductions at no cost — Schedule A, mortgage interest, SALT, PMI, home office. Less guided, but every line is there if you know what to look for.
To claim the deductions covered in this guide, you'll typically need a Deluxe or higher tier of tax software: our TurboTax vs H&R Block 2026 compares the Deluxe and Premium tiers that handle itemized deductions and home office claims. If you also have self-employment income alongside your home deductions, Best Tax Software for Self-Employed 2026 covers the tier that handles Schedule C alongside Schedule A itemization. For help deciding which tier you actually need, How to Choose Tax Software in 2026 includes a homeowner-specific decision path.
At a Glance
TurboTax Deluxe
“Most thorough homeowner interview — SALT, PMI, mortgage interest, home office all covered with explanatory guidance. $89 federal.”
What we like
- Best interview experience in tax software — plain language, smart follow-ups, no IRS jargon
- SNAP & AUTO W-2 import via photo — auto-fills from employer database (10,000+ employers)
- 1099 import from 300+ brokerages including Fidelity, Schwab, Vanguard, Robinhood
- Audit Risk Meter — flags common audit triggers as you file
- TurboTax Live option: on-demand access to live CPAs for questions (at added cost)
Watch out for
- Most expensive: $89 federal + $64 state = $153 for Deluxe — 2x the cost of TaxAct
- Self-Employed tier required for Schedule C — $129 federal before state
- Aggressive upsell prompts to upgrade or add-on throughout the experience
- TurboTax has faced FTC scrutiny for misleading 'free' advertising in the past
- TurboTax Live Full Service is expensive — full preparation by a CPA costs $200–$500+
Rates as of April 9, 2026. Terms apply. Verify on issuer site.
H&R Block Online Tax Software
“$35 Deluxe covers all homeowner deductions. Good balance of guidance and price for first-time itemizers.”
What we like
- Deluxe ($35 federal + $37 state) is the lowest-priced major-brand paid tier
- Free Online covers W-2, student loan interest, child tax credit, retirement income
- Premium ($70 federal + $37 state) covers stocks, crypto, and rental property
- 70,000+ in-person office locations for face-to-face tax help if needed
- On Your Side Review: optional human review of your completed return
Watch out for
- Free tier is narrowly scoped like TurboTax — complexity triggers upgrade
- State filing ($37/state) is cheaper than TurboTax but more than FreeTaxUSA ($15.99)
- Interface slightly less polished than TurboTax
Rates as of April 9, 2026. Terms apply. Verify on issuer site.
TaxAct Online
“Complete itemization support at $75. Solid choice for homeowners who also have investment income or rental property.”
What we like
- Self-Employed tier at $69.99 federal — less than half of TurboTax's $139
- New customer promotion: federal + 1 state for $29.99 through March 31, 2026
- Supports all major tax situations (investments, Schedule C, rental income)
- W-2 import included
- Accuracy and maximum refund guaranteed
Watch out for
- No live CPA or tax professional access on any base tier — Xpert Assist is a $49.99 add-on
- State filing costs $64.99/state on Premier and Self-Employed tiers — $20 more per state than FreeTaxUSA ($14.99)
- Free tier covers only ~44% of filers (W-2 income, no Schedule C, D, or itemized deductions)
- Navigation is less intuitive than TurboTax — error review requires more manual back-and-forth through the question flow
Rates as of April 9, 2026. Terms apply. Verify on issuer site.
FreeTaxUSA Deluxe
“Free federal Schedule A support — SALT, mortgage interest, PMI all available. $15.99 state. Best for itemizers on a budget.”
What we like
- $0 federal for Schedule C — the only major tax software offering this
- State filing at $14.99 — cheapest state option available
- Covers home office (Form 8829), vehicle mileage, equipment depreciation
- SE tax calculation and 50% SE tax adjustment handled correctly
- Quarterly estimate calculator included
- Free audit assistance included (guidance on notices)
Watch out for
- Interface is utilitarian — no deduction discovery or industry-specific prompts
- No mileage tracking app or expense import integration
- No live CPA access at any tier
- Less hand-holding — assumes you know which expenses to enter
- Customer support is primarily email — no phone option
Rates as of April 9, 2026. Terms apply. Verify on issuer site.
Frequently Asked Questions
Is the SALT deduction cap still $10,000 in 2026?
Can I deduct PMI in 2026?
How much mortgage interest can I deduct?
Should I itemize or take the standard deduction as a homeowner?
Are home improvement costs tax deductible?
What tax software is best for homeowners who itemize?
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