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The Tax Advantages of Buying a Home in 2025–2026

The Tax Advantages of Buying a Home in 2025–2026

Simple, clear, and updated for the new year.

Buying a home isn’t just about stability, freedom, and building wealth. It also opens the door to several powerful tax benefits that renters don’t get.

Here’s a clean, easy breakdown of the major tax perks — plus the important rule changes coming in 2026 that every homebuyer should know.

🌟 1. Mortgage Interest Deduction

For most homeowners, this is the biggest tax advantage.

If you itemize deductions, you can subtract the interest you paid on your mortgage from your taxable income. Because early payments are mostly interest, this can create a large deduction in the first years of homeownership.

🌟 2. Property Tax Deduction

You can deduct state and local taxes — including property taxes — up to:

  • $10,000 under current rules

  • $40,000 starting in 2025 (and continuing into 2026)

This major increase gives homeowners a much larger tax break.

🌟 3. Mortgage Insurance (PMI) Becomes Deductible Again in 2026

Big news for first-time buyers and low-down-payment loans:

Starting January 1, 2026, you can once again deduct mortgage insurance premiums, including:

  • PMI (conventional)

  • FHA mortgage insurance

  • VA funding fees

  • USDA guarantee fees

This deduction had expired, but it is officially returning.

🌟 4. Mortgage Points

If you paid “points” upfront to lower your interest rate, those points may be tax-deductible in the year you purchased your home.

🌟 5. First-Time Homebuyer IRA Benefit

First-time buyers can withdraw up to $10,000 from an IRA penalty-free to help buy a home.

You’ll still owe income tax on the withdrawal, but you skip the early withdrawal penalty.

🌟 6. Home Office Deduction (Self-Employed Only)

If you’re self-employed and use part of your home for business, you may be able to deduct a portion of:

  • Mortgage interest

  • Utilities

  • Insurance

  • Repairs

  • Internet

It’s a valuable deduction for entrepreneurs, freelancers, and small business owners.

🌟 7. Capital Gains Exclusion When You Sell

When you sell your primary residence, you can avoid paying taxes on:

  • $250,000 of profit (single)

  • $500,000 of profit (married couple)

As long as you lived in the home 2 out of the last 5 years, this exclusion can dramatically increase your take-home profit.

🔔 Important Tax Changes Coming in 2026

Here are the key updates every buyer and homeowner should know:

✔ PMI deduction returns

More savings for low-down-payment loans.

✔ SALT deduction increases to $40,000

Great news for homeowners in growing areas like Middle Tennessee.

✔ Energy efficiency tax credits end after 2025

The 30% credits for:

  • Heat pumps

  • Insulation

  • Windows

  • Solar systems

expire December 31, 2025, unless extended by Congress.

If you’re planning energy upgrades, 2025 may be your last chance to benefit.

💬 Final Thoughts

Homeownership continues to be one of the strongest paths to long-term wealth — and these tax advantages make it even more rewarding.

If you’re thinking about buying in Nashville, Mt. Juliet, Lebanon, or anywhere in Middle Tennessee and want to run numbers for your situation, I’m always here to help.