Tax season always brings a mix of excitement and dread, and I get it. Between juggling my work at AmeriSave and keeping up with my Master’s of Social Work (MSW) coursework, I barely have enough hours in the day to track all the changes Congress made. But this year, the changes are worth paying attention to, because they affect your wallet in ways that go beyond the usual inflation adjustments.
The One Big Beautiful Bill Act reshuffled some pretty significant things for homeowners. The SALT deduction cap went from $10,000 all the way up to $40,000 for combined state and local taxes, according to the Bipartisan Policy Center. That’s a huge deal if you live in a state with high property taxes or income taxes. The mortgage interest deduction limit of $750,000 also became permanent, which means you don’t have to worry about it sunsetting anymore.
On the flip side, the Residential Clean Energy Credit and Energy Efficient Home Improvement Credit both expired after last year. So if you’ve been thinking about solar panels and expecting a tax break, that ship has sailed for federal purposes. And there’s a new PMI deduction that kicks in this tax year, which is great news for anyone who bought a home with less than 20% down.
But here’s the thing most people don’t realize: just because these deductions exist doesn’t mean you should automatically itemize. The standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly, according to the IRS. Nearly 90% of taxpayers take the standard deduction because it’s simpler and often larger than their itemized total. You need to run the numbers both ways before deciding which route saves you more money.
At AmeriSave, we help first-time home buyers understand these decisions early in the home buying process. Our digital tools can help you estimate your potential tax benefits before you even close on the loan, which is one less thing to stress about when you’re already juggling inspections, appraisals, and moving logistics.
So grab a cup of coffee and let me walk you through the ten biggest deductions you need to know about this year. Some of these have been around for decades, and a few are brand new.
You need to understand this one thing before we get into the details of the deductions. It affects everything else on this list. When you file your taxes, the IRS gives you a flat deduction. Think of it as a discount that comes with the item. If you're single, the standard deduction for this tax year is $16,100. If you're married and filing jointly, it's $32,200. People who file as head of household get $24,150.
When you itemize, you tell the IRS that you spent more than the standard amount on deductible expenses and want to claim your actual total instead. But you need to keep records of everything and keep receipts. It takes more time and work. The IRS says that only 10–11% of taxpayers itemize now, down from about 30% before the Tax Cuts and Jobs Act nearly doubled the standard deduction.
This is a quick way to think about it. If you're married and your mortgage interest, property taxes, charitable donations, and other deductible expenses add up to $35,000, itemizing saves you money because $35,000 is more than the $32,200 standard deduction. If your total is $28,000, though, you should take the standard deduction and save yourself the trouble of filling out more forms.
This year, there is also a new twist that helps older homeowners. If you are 65 or older, you can claim an extra deduction of up to $6,000 (single) or $12,000 (married filing jointly) on top of your regular deduction, even if you don't itemize. That's a different benefit from the extra deduction that seniors have always gotten. It can really help people who are on a fixed income.
The main point to remember is not to just assume that one way is better. Get last year's return, change the numbers, and then compare. Most of the time, tax software will do the comparison for you. Also, if you bought a house or refinanced this year, the math probably changed since the last time you filed.
Now, let's talk about the deductions themselves.
This is usually the heavyweight of homeowner deductions. Current IRS rules allow you to deduct interest on mortgages up to $750,000 if you’re single or married filing jointly, or up to $375,000 if you’re married filing separately. That cap is now permanent under the current tax law, which removes the uncertainty that existed when it was set to expire, according to IRS Publication 936.
What actually matters here is timing. In the early years of your mortgage, most of your monthly payment goes toward interest rather than principal. So you’re paying a lot of interest, which means potentially big deductions. As you pay down the loan over time, the interest portion shrinks and more goes to principal, which gradually reduces this deduction’s value.
Let’s work through a real calculation. Say you have a $400,000 mortgage at 6.09% (based on the Freddie Mac Primary Mortgage Market Survey). Your first-year interest comes out to roughly $400,000 multiplied by 0.0609, which equals about $24,360. If you’re in the 24% tax bracket, that deduction saves you approximately $5,846 on your tax bill. Your first monthly payment would break down to roughly $2,030 in interest and only about $393 going toward principal. That interest-heavy split is exactly why this deduction packs such a punch early on.
One thing to keep in mind: you need to add up ALL your potential itemized deductions before deciding to claim this one. The mortgage interest deduction only helps if your total itemized amount beats the standard deduction. Your lender will send you Form 1098 by the end of January, showing exactly how much interest you paid if it was at least $600. Hold onto that form.
Something else worth knowing: you can deduct mortgage interest on both your primary residence and one secondary home, like a vacation property. But the $750,000 cap applies to the combined mortgage debt on both properties. If your primary mortgage is $500,000 and your lake house mortgage is $300,000, you’re at $800,000 total, and only the interest attributable to the first $750,000 would qualify. Your tax professional can help you calculate the exact allocation.
At AmeriSave, we process thousands of mortgages every month, and the interest paid in that first year consistently surprises new homeowners when they see it on their 1098. Knowing how the amortization schedule works gives you a better picture of what to expect at tax time and helps you plan your finances throughout the year.
This is where things get really interesting. The SALT deduction cap increased from $10,000 to $40,000 for combined state and local taxes, which includes property taxes, state income taxes, and sales taxes. This change took effect last tax year and runs through the end of the decade, according to the Bipartisan Policy Center. For homeowners in states like New Jersey, New York, California, and Connecticut, this is a massive change.
Here is a real-life example. For example, you live in a state with high taxes and pay $15,000 in property taxes and $18,000 in state income taxes. That's a total of $33,000 in SALT. You could only deduct $10,000 of that total under the old limit of $10,000. Now that the limit has gone up to $40,000, you can deduct the full $33,000. That means you can take $23,000 more off your taxes than you could before.
But there is a catch for people who make more money. The $40,000 limit starts to go down if your Modified Adjusted Gross Income is more than $500,000. It goes down slowly until it reaches $10,000 for people with MAGI over $600,000. So the full benefit is really aimed at homeowners with middle and upper-middle incomes.
One of the best things about living in Kentucky is that property taxes are lower here than on the coasts. But even if you owe $3,500 in property taxes and $4,000 in state income taxes, that $7,500, along with your mortgage interest and donations to charity, might put you over the standard deduction limit. When you're doing the math, every dollar matters.
One thing to keep in mind is that you can only deduct property taxes that you actually paid during the tax year. If your lender collects taxes through an escrow account, look at your Form 1098 or mortgage statement to see what the lender actually paid to the tax authority on your behalf, not what you put into escrow. Those amounts can be different, and one of the most common mistakes homeowners make when they file is to claim the wrong amount.
Keep in mind that this $40,000 limit includes all of your state and local taxes, such as property taxes, state income taxes, and personal property taxes. You can't take off $40,000 in property taxes and $40,000 in income taxes. There is only one shared bucket. If you and your spouse file separately, the limit is $20,000 per person.
For long-term planning, it's important to know that this provision is only temporary. Unless Congress extends it, the $40,000 limit will go back down to $10,000 at the end of the decade. So, right now is a good time for homeowners in states with high taxes to take advantage of this benefit. The current SALT cap makes the math better than it has been in years if you are thinking about moving to a state with higher taxes or buying a more expensive home. Before you buy a home, AmeriSave's team can help you see how different mortgage amounts will affect your overall tax situation.
This one trips people up constantly. I remember when the home processing workflows came through our team at AmeriSave, and the compliance training around this deduction was thorough for good reason.
You can deduct interest on home equity loans and home equity lines of credit, but only if you used the borrowed funds to buy, build, or substantially improve your home, as specified in IRS Publication 936. The use of the money matters more than the amount you borrowed.
So if you took out a $50,000 home equity loan to remodel your kitchen or add a second bathroom, the interest is deductible. But if you used that same loan to pay off credit card debt, buy a car, or take a vacation, the interest is not deductible at all. The IRS draws a hard line here. Keep excellent records of what you used the money for, because if you get audited, you’ll need to prove it.
The same $750,000 total limit applies to your combined mortgage and home equity debt. So if you have a $650,000 mortgage and a $100,000 HELOC, you’re right at the cap. Anything borrowed above that $750,000 combined total won’t qualify for the interest deduction. AmeriSave offers both home equity loans and HELOCs, and our loan advisors can help you understand how the combined debt limit affects your situation before you borrow.
You might be able to buy discount points to lower your interest rate when you get a mortgage. A point is usually equal to 1% of the loan amount. Here's the important difference: you can deduct discount points that you pay to lower your interest rate, but you can't deduct loan origination fees that your lender calls "points" because they're processing fees, not prepaid interest.
You can usually deduct the full amount of discount points you paid in the year you bought your main home. However, if you refinanced, you usually have to take the deduction over the whole life of the loan. So if you refinanced for 30 years and paid $4,500 in discount points, you would take $4,500 and divide it by 360 months, which would be $12.50 per month or about $150 per year. It's not a lot, but it adds up over time.
AmeriSave's online tools can show you exactly how much you'd save by buying points instead of keeping your rate the same. This makes the choice much clearer before you close. If you're buying your first home and this is all new to you, don't worry. Your Closing Disclosure will show if you paid discount points and how much they were.
This is big news for anyone who bought a home with less than 20% down. Starting this tax year, Private Mortgage Insurance premiums are treated as deductible mortgage interest under the current tax law, according to reporting from NewHomeSource. This deduction had expired after the last time it was available and has now been revived.
To qualify, your adjusted gross income needs to be below $100,000 for both single and joint filers. The deduction starts phasing out above that threshold and disappears completely at $110,000 AGI. When this deduction was last available, qualified homeowners received an average deduction of about $2,364, so it’s not pocket change.
PMI typically costs $30 to $70 per $100,000 borrowed annually. On a $400,000 loan, that’s roughly $1,200 to $2,800 per year in premiums. Being able to deduct that amount when you itemize can meaningfully reduce your tax bill. One important caveat: FHA mortgage insurance premiums are treated differently and do not qualify under these same rules.
If you’re currently paying PMI, check your Form 1098 for the exact amount paid during the year. And if you’re getting close to 20% equity in your home, reach out to AmeriSave about removing PMI altogether, which saves you money every month going forward.
If you need to make permanent improvements to your home for medical reasons, those costs may qualify as deductible medical expenses. This is one of the most overlooked deductions available to homeowners, and it can add up quickly depending on the work involved.
According to IRS Publication 502, qualifying improvements include installing wheelchair ramps, widening doorways for wheelchair accessibility, adding grab bars and support rails in bathrooms, lowering kitchen cabinets for accessibility, and modifying electrical or plumbing systems to accommodate medical equipment. The improvement must be medically necessary and prescribed or recommended by a physician.
The catch is that medical expenses are only deductible to the extent they exceed 7.5% of your adjusted gross income. So if your AGI is $100,000, you can only deduct medical expenses above $7,500. If your total medical expenses for the year, including these home improvements, come to $12,000, you can deduct $4,500 of that ($12,000 minus $7,500). You’ll need a letter from your doctor documenting the medical necessity, and you should keep all receipts and contractor invoices.
Something I learned in my Master’s of Social Work (MSW) program is how deeply financial stress intersects with health challenges. Families dealing with medical needs and home modifications at the same time face enormous pressure. Getting these deductions right can ease at least some of that burden.
If you run a business from home, you might be able to write off some of your housing costs for that space. But the rules are very strict, and I want to make sure everyone understands this because people get it wrong all the time.
IRS Publication 587 says that to qualify for the home office deduction, the space must be used for business on a regular basis and only for business. That means you have to use the space for business all the time and only for business. It doesn't count if your spare bedroom is also a guest room. And here's the part that surprises most people: if you work from home for your company, even full-time, you can't take this deduction. It is only for people who work for themselves or own a business.
You can use two different ways to figure out if you qualify. The simplified method lets you take off $5 for each square foot of dedicated office space, up to a maximum of 300 square feet, for a total of $1,500. The normal way is to figure out how much your home costs (mortgage interest, insurance, utilities, repairs) and then multiply that by the percentage of your home that is used for business. The regular way is harder, but it can give you a bigger deduction depending on how much you spend.
To give you an idea, here's a quick example. Let's say your house is 2,000 square feet and your office is 200 square feet. That's a tenth of your house. If your total housing costs for the year (mortgage interest, insurance, utilities, and repairs) are $24,000, your deduction would be $2,400. The simplified method says that 200 square feet times $5 equals $1,000. The regular way wins by $1,400, but it also means keeping track of every housing cost in detail. Do both calculations and choose the one that gives you the bigger number.
This isn’t an annual deduction you claim every year, but it’s massive when it applies. If you sell your primary residence for a profit and you’ve lived there for at least two of the last five years, you can exclude up to $250,000 of that gain from taxes if you’re single, or up to $500,000 if you’re married filing jointly, per IRS Publication 523.
Consider a couple who bought their home for $300,000 several years ago. They sell it for $550,000, realizing a $250,000 gain. If they’re married and lived in the home for at least two years, they owe zero capital gains tax on that profit. That’s potentially tens of thousands of dollars in tax savings that most other investments can’t match.
The two-out-of-five-years rule is important to understand. You don’t need to live there continuously, but you need 24 months of residency within the five-year window before the sale. Military families and certain other groups may qualify for exceptions to this timeline. Also keep in mind that any home improvements you made can increase your cost basis, which reduces your taxable gain even further.
AmeriSave works with home buyers at every stage, including people who are selling one home and buying another. Understanding the capital gains exclusion can influence your timing and whether you decide to upgrade, downsize, or relocate.
Here’s something that catches a lot of people off guard. When calculating your SALT deduction, you can choose between deducting state income taxes or state sales taxes. You cannot deduct both, per IRS Topic No. 503. For most people in states with income tax, deducting income tax produces a larger benefit. But for homeowners in states with no income tax, like Texas, Florida, Nevada, Tennessee, or Washington, the sales tax deduction is your only option under SALT.
This also comes into play if you made a large purchase during the year. Bought a car, a boat, or did a major renovation where you paid significant sales tax? Run the numbers both ways. The IRS provides optional sales tax tables that estimate your deduction based on your income and state, or you can calculate your actual sales tax if you kept receipts throughout the year.
With the SALT cap now at $40,000, this choice matters more than it used to. If you’re in a no-income-tax state and your property taxes plus sales taxes add up to a meaningful number, the combined SALT deduction could push you past the standard deduction threshold.
A lot of people don't know about this new tax break yet. The IRS says that homeowners who are 65 or older can get an extra deduction of up to $6,000 for single filers or $12,000 for married couples filing jointly. This deduction is available whether you itemize or take the standard deduction, which makes it even more useful.
But the income limits are very important. For single filers, the deduction starts to go away at $75,000 in Modified Adjusted Gross Income. For joint filers, it starts to go away at $150,000. Above those limits, the deduction goes down slowly. This benefit is only available for a short time, until the end of the decade, so homeowners who qualify should take advantage of it now.
This new deduction is in addition to the extra standard deduction that seniors already get. It is for a retired couple with a paid-off home and a moderate income. When used together, these rules can significantly lower the tax bill for older homeowners who may be living on fixed incomes.
It’s just as important to know what doesn’t qualify as it is to know what does. The IRS is clear about non-deductible home expenses in Publication 530, and the list includes homeowners insurance premiums, fire insurance, the principal portion of your mortgage payment, domestic service costs, depreciation on your personal residence, and the cost of basic utilities like water, gas, and electricity.
I’ve heard colleagues at AmeriSave mention that borrowers sometimes ask about deducting HOA fees, landscaping costs, home security systems, and general maintenance like painting or fixing a leaky faucet. Unless these are connected to a documented business use of your home, they’re not deductible. Routine repairs and upkeep, no matter how expensive, don’t qualify either.
And one more thing that changed this year: the Residential Clean Energy Credit and Energy Efficient Home Improvement Credit both expired at the end of last year. So solar panels, insulation upgrades, heat pumps, and similar energy improvements no longer qualify for federal tax credits on current returns. If you made qualifying improvements last year, you can still claim them on your prior-year return, but going forward, those credits are gone unless Congress acts again.
The process is easier than most people think, but it does need some planning. This is how to do it.
First, get all of your paperwork together. Your mortgage lender will need Form 1098, which shows the interest and points you paid, your property tax statements, receipts for any home improvements that you can deduct, and home equity loan documentation that shows how you used the money. If you have a home office, you will also need to provide measurements and records of your expenses.
Next, add up all of your itemized deductions. Add up your mortgage interest, property taxes, and other SALT (up to $40,000), as well as your charitable donations, medical bills that are more than 7.5% of your AGI, and any other expenses that qualify. You can compare that amount to the standard deduction for your filing status: $16,100 for single filers, $24,150 for heads of household, or $32,200 for married couples who file together.
You will file Schedule A with Form 1040 if your itemized total is higher. If the standard deduction is more, take it and save yourself the trouble. You can change how you file from year to year, so it's a good idea to do the comparison every filing season because your situation may change. Itemizing is often the best way to go when you bought a house, refinanced, or made big changes to your home.
If you claim a loss from a bad debt or worthless securities, you should keep all your records for at least three years after filing. If you don't, you should keep them for seven years. The IRS can audit returns during that time, and having your records in order will make things go more smoothly if they do.
One more piece of advice based on my own experience: keep all of your housing-related tax papers in a separate folder, whether it's physical or digital, as they come in throughout the year. Your Form 1098 comes in January, and your property tax statements come at different times depending on where you live. Whenever you do work on the house, you get improvement receipts. It's stressful to get everything together all at once in April. Making the folder as you go makes tax time a lot easier. After my second year at AmeriSave, I started doing this, and it's one of the easiest ways to be productive that really works.
Numbers tell the story better than theory, so let me walk through three situations that cover the range of what homeowners actually face.
Imagine a single filer with a $350,000 mortgage at 6.09%. In the first year, they’d pay approximately $21,315 in mortgage interest. Add $3,500 in property taxes and $1,500 in charitable donations, and the total itemized deductions come to about $26,315. Since that’s well above the $16,100 standard deduction, itemizing makes sense. At a 24% tax bracket, the additional $10,215 in deductions beyond the standard amount saves roughly $2,452 in taxes.
A married couple filing jointly with a $250,000 mortgage at 6.09% paid roughly $15,225 in interest during the first year. Their property taxes come to $4,500, and they donated $2,000 to charity. That puts their itemized total at about $21,725, which falls short of the $32,200 standard deduction. This couple should take the standard deduction. It’s simpler and saves them more money.
A married couple in New Jersey with a $600,000 mortgage at 6.09% pays about $36,540 in interest each year. Their property taxes are $15,000, and their state income tax is $18,000. Giving to charity adds up to $5,000. They pay $33,000 in SALT (property tax and state income tax), which is less than the $40,000 limit. The total amount of itemized deductions is $74,540, which is $36,540 in mortgage interest, $33,000 in SALT, and $5,000 in charitable donations. That is more than the standard deduction of $32,200, which means you will save a lot of money on taxes.
The difference between this couple's itemized total ($74,540) and the standard deduction ($32,200) is $42,340. That extra deduction saves them about $10,162 in federal taxes compared to the standard deduction, which is in the 24% tax bracket. If the old SALT cap had still been in place, their deductible SALT would have been limited to $10,000 instead of $33,000. This would have brought their itemized total down to $51,540 and their savings down by about $5,520. That's how the SALT cap increase will affect people in the real world.
These examples show that general advice doesn't work. Your mortgage balance, interest rate, property location, income level, and filing status all work together to decide if itemizing is good or bad for you. You can use AmeriSave's online tools to see how different mortgage scenarios would affect your possible tax deductions before you buy. Planning like this pays off year after year.
Owning a home can save you money on taxes, but these benefits aren't automatic and they don't work for everyone. The recent changes, like the new PMI deduction and the SALT deduction increase to $40,000, really help a lot of homeowners. But if you live in a state with low taxes and a small mortgage, the standard deduction might still be better for you.
What I've learned from working on the development side at AmeriSave and from my Master's of Social Work (MSW) classes is that money decisions are never just about the numbers. They are about lowering stress, building stability, and being sure that you are making the best choice for your family. When my kids' soccer schedule gets busy and the semester's work piles up, the last thing I need is tax confusion on top of everything else. Getting things in order early makes everything easier to handle.
Before you file, the best thing you can do is run the numbers for your own situation. Don't think that what worked last year will work this year because the rules have changed. AmeriSave's loan advisors can help you figure out how your mortgage structure affects these tax benefits. A qualified tax professional can also look at the whole picture and make sure you're claiming everything you're owed. Go to amerisave.com to get in touch with us and look at your options. When the stakes are this high, don't try to figure this out on your own.
You need Form 1098 from your mortgage lender that shows the interest and points you paid, property tax statements from your county or city, and receipts for any home improvements or medical changes you can write off. If you used a home equity loan to make improvements that qualify, keep the loan paperwork and receipts showing how you spent the money. You must keep records for at least three years after you file with the IRS.
Your Form 1098 or a separate statement from your lender should also show the amount of PMI you paid this year. If you itemize, you'll also need receipts for charitable donations, records of medical expenses, and measurements of your home office. AmeriSave sends borrowers year-end statements that include all the information they need to file their taxes. You can find out more about the process by looking at home equity loan options or cash-out refinance information on our website.
Yes. Under the current tax law, Private Mortgage Insurance premiums are now considered deductible mortgage interest starting this tax year. Your adjusted gross income must be less than $100,000 for you to get the full deduction, whether you file as single or jointly. The deduction goes away completely after $110,000 AGI and starts to go away between $100,000 and $110,000.
This is mostly good for people who take out conventional loans and put down less than 20% because they have to pay PMI. The same rules don't apply to FHA mortgage insurance premiums. The last time the PMI deduction was available, homeowners who qualified got an average benefit of about $2,364. AmeriSave can help you figure out when you might be able to refinance to a fixed-rate loan without PMI if you're currently paying PMI and getting close to 20% equity.
Yes. The Residential Clean Energy Credit and the Energy Efficient Home Improvement Credit both ran out at the end of last year. This year, you won't be able to get federal tax credits for solar panels, heat pumps, insulation, energy-efficient windows, or other similar upgrades. You can still claim improvements you made last year on your previous year's return if they met the requirements.
Even without the tax credit, the financial case for energy-efficient upgrades still stands because they save money on utilities and make your home worth more. Some states and local utilities still have their own rebate and incentive programs. If you're thinking about making improvements to your home and want to know what financing options you have, check out AmeriSave's HELOC or home equity loan products that can help pay for those projects.
You can now deduct up to $40,000 in state and local taxes, such as property taxes, state income taxes, or state sales taxes, because the SALT cap went up from $10,000 to $40,000. This is best for homeowners in states with high taxes, where property taxes and state income taxes used to be much higher than the old $10,000 limit.
The $40,000 limit starts to go down if your MAGI is more than about $500,000. If your MAGI is more than about $600,000, the cap goes back down to $10,000. The higher cap is also only for a short time and will go back down to $10,000 at the end of the decade unless it is extended. Homeowners in states like New York, New Jersey, California, and Connecticut will benefit the most. Visit AmeriSave's FHA loan page or look into other mortgage options to learn more about how your mortgage and taxes work together.
No. Only business owners and people who work for themselves can claim the home office deduction. You can't take this deduction if you work from home as a W-2 employee, even if you do it full-time. The Tax Cuts and Jobs Act got rid of the employee home office deduction, so this rule has been in place since then.
If you work for yourself and meet the requirements, you can deduct $5 per square foot up to 300 square feet using the simplified method. Alternatively, you can use the regular method to figure out your actual costs based on the percentage of your home that is used for business. You can only use the space for business and not for anything else. A room that can be used as a guest bedroom does not count. AmeriSave has jumbo loans and fixed-rate mortgages that are good for different kinds of income structures if you want to learn more about how to manage your mortgage while self-employed.
You can take off the mortgage interest and property taxes you paid from January to the day you closed. Your settlement statement will show how much interest was paid at closing and how the property tax was split between you and the buyer. You can deduct these amounts for the time you owned the home.
If you sell for a profit and have lived in the house for at least two of the last five years, you may also be able to get the capital gains exclusion of up to $250,000 for single filers or $500,000 for married couples filing jointly. Your closing costs and the papers you got when you bought the property help set your cost basis, which is what you owe in taxes. AmeriSave is good for both buyers and sellers of homes. If you're buying a new home, look into VA or FHA loans that might work for you.
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