The Tax Advantages of Buying a Home
If you’re thinking about becoming a homeowner any time soon, there are tax benefits to buying. In particular, tax deductions are one way to reduce your tax bill and income. Tax deductions are different from credits. Credits are money that gets taken off a tax bill. You can think of them somewhat like a coupon. A tax deduction reduces your adjusted gross income or AGI, reducing your tax liability.
The following are key tax benefits and things to know for homebuyers or possible homebuyers.
In July 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, introducing several changes that impact homeowners' taxes.
Here's a summary of key changes for homeowners:
- State and Local Tax (SALT) Deduction: The cap on the SALT deduction has been raised to $40,000 ($20,000 for married individuals filing separately) for 2025 through 2029, according to ssb-cpa.com. This cap will be subject to 1% annual inflation adjustments. Starting in 2030, the cap is scheduled to revert to the previous limit of $10,000 ($5,000 for married individuals filing separately) unless further congressional action is taken.
- Mortgage Interest Deduction: The $750,000 limit for the mortgage interest deduction has been made permanent by the OBBBA, according to the Bipartisan Policy Center. This means the limit will not increase to $1 million after 2025, as was previously scheduled. Mortgage insurance premiums are also restored as eligible for the deduction.
- Home Equity Debt Interest: The OBBBA permanently eliminates the deduction for interest on home equity debt, unless the debt was used to buy, build, or substantially improve the taxpayer's home, says Duane Morris LLP.
- Energy Efficiency Tax Credits: Federal tax credits for energy-efficient home improvements and clean energy equipment are available through December 31, 2025. These include the Energy Efficient Home Improvement Credit (up to $3,200) and the Residential Clean Energy credit (30% for rooftop solar, wind, geothermal heat pumps, and battery storage).
- Residential Energy Credits: These credits will generally terminate and not be available after 2025.
Note: It's important to remember that tax laws can be complex and subject to change. Consulting with a qualified tax professional is recommended for personalized advice and clarification on specific situations. You can also refer to official IRS publications for the most up-to-date and comprehensive information.
