2026 Tax Changes for Homeowners: What You Need to Know

The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, introduced significant tax changes that will affect millions of homeowners starting in 2026. Some changes put money back in your pocket, while others eliminate benefits you may have been counting on. Here’s what you need to know before filing your 2026 tax return in early 2027.

Key Takeaways

• Private mortgage insurance (PMI) premiums become tax-deductible as mortgage interest starting in 2026, potentially saving homeowners with less than 20% down an average of $2,364 annually.
• The SALT deduction cap increases from $10,000 to $40,000 for tax years 2025-2029, benefiting homeowners in high-tax states.
• The 30% residential clean energy credit for solar panels and home batteries expired December 31, 2025—no federal credit is available for homeowner-purchased systems in 2026.
• The standard deduction rises to $32,200 for married couples filing jointly and $16,100 for single filers, which may affect whether you benefit from itemizing mortgage interest.
• The $750,000 mortgage interest deduction limit is now permanent, and home equity loan interest remains non-deductible unless used to buy, build, or improve your home.

Table of Contents

• Key Takeaways
• PMI Premiums Now Tax-Deductible
• SALT Deduction Cap Increases to $40,000
• Mortgage Interest Deduction Made Permanent
• Home Equity Loan and HELOC Interest Rules
• Energy Credits Expired: What You Missed
• Higher Standard Deduction: Should You Still Itemize?
• New Senior Deduction for Homeowners 65+
• 2026 Tax Brackets at a Glance
• Action Steps for Homeowners
• Frequently Asked Questions

PMI Premiums Now Tax-Deductible

One of the biggest wins for homeowners in 2026 is the permanent reinstatement of the private mortgage insurance (PMI) deduction. If you put down less than 20% on a conventional loan, you likely pay PMI—and starting with your 2026 taxes, those premiums are treated as deductible mortgage interest.

This isn’t a new concept. The PMI deduction existed from 2007 through 2021, and during that time it was claimed 44 million times. According to Arch Mortgage Insurance, qualified homeowners deducted an average of $2,364 in tax year 2021 alone. Now it’s back—permanently.

The deduction covers more than just conventional loan PMI:

• Private mortgage insurance (PMI) on conventional loans
• FHA mortgage insurance premiums (both upfront and annual)
• VA funding fees
• USDA guarantee fees

There’s an income limit to keep in mind. The PMI deduction begins to phase out when your adjusted gross income (AGI) exceeds $100,000 ($50,000 if married filing separately). The deduction reduces by 10% for each $1,000 your AGI exceeds the threshold, disappearing entirely at $110,000 AGI for single filers and married couples filing jointly.

For a homeowner in the 22% tax bracket paying $200 per month ($2,400 annually) in PMI, this deduction could reduce your federal tax bill by approximately $528 per year—real money that adds up over the life of your loan.

SALT Deduction Cap Increases to $40,000

Homeowners in high-tax states have been frustrated by the $10,000 cap on state and local tax (SALT) deductions since 2018. The OBBBA provides temporary relief by increasing this cap to $40,000 for tax years 2025 through 2029.

The SALT deduction includes:

• State income taxes (or state sales taxes, if you choose)
• Local income taxes
• Property taxes on your home

For homeowners in states like New York, New Jersey, California, and Connecticut—where property taxes alone can exceed $10,000—this is significant. A homeowner paying $15,000 in property taxes and $12,000 in state income taxes could now deduct the full $27,000 instead of being capped at $10,000.

However, there’s a catch for higher earners. The increased SALT cap phases out for taxpayers with modified adjusted gross income (MAGI) above $500,000 ($250,000 if married filing separately). The phaseout reduces your SALT cap by 30% of MAGI above the threshold, but it won’t drop below the original $10,000 floor.

For 2026 specifically, the cap is $40,400 after the 1% annual inflation adjustment built into the law.

Important: The $40,000 SALT cap is temporary. Unless Congress acts, it’s scheduled to revert to $10,000 starting in 2030.

Mortgage Interest Deduction Made Permanent

The OBBBA makes the current mortgage interest deduction limits permanent. You can deduct interest on up to $750,000 of mortgage debt ($375,000 if married filing separately) used to buy, build, or substantially improve your primary or secondary home.

If your mortgage originated before December 16, 2017, you’re grandfathered in at the old $1 million limit.

This permanence provides planning certainty. Under the previous Tax Cuts and Jobs Act, these limits were set to expire after 2025, which would have reverted the cap to $1 million. Now you know the rules won’t change—the $750,000 limit is here to stay.

For most middle-class homeowners, this limit won’t be restrictive. At current interest rates around 6.5%, a $750,000 mortgage generates roughly $48,750 in first-year interest—well above what most homeowners pay. The limit primarily affects buyers in high-cost markets like San Francisco, New York, and Los Angeles.

Home Equity Loan and HELOC Interest Rules

The rules for deducting interest on home equity loans and HELOCs remain unchanged—and restrictive. Interest is only deductible if you use the funds to buy, build, or substantially improve your home.

Deductible uses include:

• Adding a room or building an addition
• Major kitchen or bathroom renovation
• Replacing your roof or HVAC system
• Finishing a basement or attic

Non-deductible uses include:

• Paying off credit card debt
• Buying a car
• Paying for college tuition
• Taking a vacation
• Covering everyday expenses

If you use a HELOC for both qualifying and non-qualifying purposes, you’ll need to track the funds carefully and only deduct interest on the portion used for home improvements. This is another reason to keep detailed records of how you spend HELOC funds.

The combined limit for your primary mortgage plus any home equity debt used for home improvements remains $750,000 ($1 million for pre-December 2017 mortgages).

Energy Credits Expired: What You Missed

If you were planning to install solar panels, a home battery, or energy-efficient windows in 2026 and claim a federal tax credit, you’re too late. The One Big Beautiful Bill Act terminated the residential clean energy credit as of December 31, 2025.

What expired:

• Residential Clean Energy Credit (Section 25D): The 30% credit for solar panels, wind turbines, geothermal heat pumps, fuel cells, and battery storage systems ended December 31, 2025. Previously, this credit was scheduled to continue through 2034 with a gradual phase-down.
• Energy Efficient Home Improvement Credit (Section 25C): The credit covering up to $3,200 for heat pumps, insulation, windows, doors, and other efficiency upgrades also expired December 31, 2025.

According to NerdWallet, more than 1.2 million taxpayers claimed $6.3 billion through the residential energy tax credit in 2023 alone, with rooftop solar representing 60% of those claims. The average solar installation cost $27,720 in early 2025, meaning homeowners who acted before the deadline saved approximately $8,316 through the federal credit.

What’s still available:

• Solar leases and PPAs: Third-party owned solar systems (where a company owns the panels and you pay for the electricity) can still qualify for the commercial solar tax credit through 2027. Providers may pass some savings to you through lower rates.
• State incentives: Many states offer their own solar rebates, tax credits, and net metering programs independent of federal policy. Check with your state energy office for current programs.

Even without tax credits, solar can still make financial sense depending on your electricity costs and local utility rates. Rising electricity prices—up 32% over the past decade according to EnergySage—continue to make solar an attractive long-term investment for many homeowners.

Higher Standard Deduction: Should You Still Itemize?

The standard deduction continues to rise with inflation adjustments. For 2026, the amounts are:

• Married filing jointly: $32,200
• Single filers: $16,100
• Head of household: $24,150
• Married filing separately: $16,100

These higher standard deductions mean fewer homeowners benefit from itemizing. To make itemizing worthwhile, your total itemized deductions—including mortgage interest, property taxes (within SALT limits), charitable contributions, and other qualifying expenses—must exceed the standard deduction.

Consider this example for a married couple filing jointly:

• Mortgage interest paid: $15,000
• Property taxes: $8,000
• State income taxes: $6,000
• Charitable contributions: $2,000
• Total itemized deductions: $31,000

In this case, the standard deduction of $32,200 is higher, so this couple would take the standard deduction and receive no additional tax benefit from their mortgage interest or property taxes.

The math changes significantly for homeowners in high-tax states who can now deduct more under the increased SALT cap, or those with larger mortgages generating substantial interest payments.

New Senior Deduction for Homeowners 65+

The OBBBA created a new tax benefit for seniors that can help offset homeownership costs. Taxpayers age 65 and older can claim an additional $6,000 deduction ($12,000 for couples where both are 65+). This is separate from and in addition to the existing additional standard deduction for seniors.

The $6,000 senior deduction phases out at a 6% rate for income above $75,000 (single) or $150,000 (married filing jointly). This means it disappears entirely at $175,000 for single filers and $350,000 for married couples.

Combined with the regular additional standard deduction for seniors ($2,050 for single filers, $1,650 per person for married filing jointly), this provides meaningful tax relief for older homeowners on fixed incomes.

Note: This new senior deduction is temporary and expires after the 2028 tax year unless extended by Congress.

2026 Tax Brackets at a Glance

Understanding your tax bracket helps you calculate the actual value of deductions. Here are the 2026 federal income tax brackets:

Single Filers:

• 10%: $0 – $11,925
• 12%: $11,926 – $48,475
• 22%: $48,476 – $103,350
• 24%: $103,351 – $197,300
• 32%: $197,301 – $250,525
• 35%: $250,526 – $640,600
• 37%: Over $640,600

Married Filing Jointly:

• 10%: $0 – $23,850
• 12%: $23,851 – $96,950
• 22%: $96,951 – $206,700
• 24%: $206,701 – $394,600
• 32%: $394,601 – $501,050
• 35%: $501,051 – $768,700
• 37%: Over $768,700

Remember, these are marginal rates. Only the income within each bracket is taxed at that rate—not your entire income.

Action Steps for Homeowners

Here’s what to do now to prepare for the 2026 tax changes:

1. Check your PMI status: If you’re paying private mortgage insurance, estimate your annual premium and factor it into your itemized deduction calculation. This newly deductible expense might push you over the standard deduction threshold.

2. Recalculate whether to itemize: With the increased SALT cap and new PMI deduction, run the numbers to see if itemizing now makes sense for your situation—even if it didn’t in recent years.

3. Track HELOC usage: If you have a home equity line of credit, document how you use the funds. Interest is only deductible on amounts spent on home improvements.

4. Review your withholding: If the tax changes significantly affect your situation, adjust your W-4 withholding to avoid a large balance due or refund.

5. Consult a tax professional: The interaction of PMI deductions, SALT caps, and standard deduction thresholds can be complex. A qualified tax preparer can help you optimize your strategy.

Frequently Asked Questions