The tax landscape for homeowners shifted meaningfully this year, with some deductions expanding, one returning from expiration, and others disappearing entirely.

The most significant change for many homeowners is the increase in the state and local tax (SALT) deduction cap. The cap, which had been limited to $10,000 since 2018, rose to $40,000 for the 2025 tax year under the One Big Beautiful Bill Act. In 2026, it climbs to $40,400 and increases by 1% annually through 2029, before reverting to $10,000 in 2030. Tax experts caution that the higher cap does not automatically benefit everyone. Homeowners who take the standard deduction rather than itemizing may see no direct benefit from the change, and renters and lower-income homeowners are also less likely to see an impact.

Private mortgage insurance (PMI) premiums are now deductible again after a years-long lapse. The deduction, which expired after 2021, has been revived, and PMI is now treated as deductible mortgage interest. To qualify, a homeowner’s adjusted gross income must be below $100,000, with the deduction phasing out entirely at $110,000. The change primarily benefits home buyers who put down less than 20% and are required to carry PMI.

The mortgage interest deduction cap of $750,000 — reduced from $1 million under the Tax Cuts and Jobs Act — is now permanent.

On the other side of the ledger, two energy-related tax credits have ended. The Residential Clean Energy Credit and the Energy Efficient Home Improvement Credit both expired at the end of 2025. Homeowners who made qualifying improvements last year can still claim them on their 2025 return, but the credits are no longer available going forward.

Tax experts advise homeowners not to let tax considerations drive major real estate decisions. Wisconsin-based tax expert Keith Schroeder put it simply: “Taxes are the frosting on the cake. If taxes are the only reason to do the deal, there might be issues.”

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