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Who doesn’t dread tax time? But buying a house could ease that pain slightly, because the government still offers some good tax breaks for homeowners.
“If you are comparing apples to apples, then buying a house can be one of the biggest benefits for individual taxpayers,” says Jeff Upchurch, CPA and owner of Upchurch & Associates in Chicago. “For tax purposes with all things equal, if you can afford it and you can be happy, there is no tax reason not to buy a house. There are some really nice tax benefits to doing it.”
Check your home buying eligibility. Start here (Nov 8th, 2026)
Tax breaks for homeowners
To deduct the expenses of owning a home, you must itemize. According to IRS Publication 530, that means you file Form 1040 and list your deductions on a Schedule A. If you itemize, you cannot also take the standard deduction. For tax year 2026, the standard deduction is $32,200 for a couple filing jointly and $16,100 for a single filer. For tax year 2025, it was $31,500 and $15,750. Upchurch says most people don’t itemize their deductions unless they have a mortgage.
Two of the biggest tax breaks for homeowners are deducting the interest you pay on your mortgage and your real estate taxes.
For example, say you have a $300,000 mortgage at 5 percent for 30 years. You could deduct the roughly $15,000 in interest you pay in the first year. Plus, you get to deduct the real estate taxes that you paid for that year.
But Upchurch wants people to know that it isn’t an exact reduction in taxes. People misunderstand that concept.
“It’s not quite one-to-one. The deduction reduces your income so that your taxable income is lower,” he says.
Your mortgage company will generally send you a statement, Form 1098, by January 31 of each year. It shows how much interest you paid on that mortgage the year before. In the beginning of your mortgage, you pay mostly interest. But as you get into later years of the loan, you pay more of the principal each month and the interest amount goes down. As a result, you will have less to deduct.
Why the tax benefits can be overrated
Joseph Clemens is a certified financial planner and co-founder and owner of Wisdom Wealth Strategies in Denver. He likes to be the pragmatist about the hype over the tax benefits of buying a house.
“Sometimes, this can be generally overrated,” says Joseph Clemens, “It is a subsidy. It’s from the government. It’s no different than when we go out and buy a phone. We get a subsidy. We get a $300 phone for a lot less, but we have to sign up for a 2-year contract. Whenever you are taking a subsidy, you shouldn’t make the purchase just because of the subsidy.”
He explains that was part of the problem that the real estate and mortgage crisis happened in 2008. People were getting in homes too big and too expensive.
“They bought more than they should because they were factoring in their tax benefits,” he says.
Estimate your tax savings before you buy
Potential home buyers might come out ahead if they take some time to estimate their tax benefits. They can do that with their financial planner or accountant. For instance, Clemens uses an example while teaching at College of Financial Planning in Denver.
It’s a straightforward case scenario. John and Jane Smith pay $1,000 a month in mortgage interest. They make $125,000 as a couple. Clemens throws in that they pay $2,500 in real estate taxes, which is also deductible.
With only those two deductions, their 2026 itemized total would be $14,500 ($12,000 in interest plus $2,500 in taxes). That is less than the $32,200 standard deduction for a married couple filing jointly in 2026. As a result, itemizing would not lower their federal tax.
“It is always presented that tax benefits are so good for homeownership. Real estate people use it as a part of their pitch. But it might not always be good. It’s a case-by-case situation,” he says. “People are living paycheck to paycheck. Most Americans don’t have enough liquid savings.”
Check your home buying eligibility. Start here (Nov 8th, 2026)
Additional tax deductions for homeowners
The IRS includes a few other, smaller tax breaks for homeowners when you buy a house. One is the cost of points paid at closing. Another is mortgage insurance premiums. They were not deductible for 2022 through 2025. However, they are deductible again starting with tax year 2026 if you itemize and meet the income and loan rules.
First-time buyers can also withdraw up to $10,000 from an IRA and avoid the 10% early-withdrawal penalty. Even so, that withdrawal is still taxable income. Profit on the sale of the house can also be tax-free. Home improvements are not deductible. However, their cost adds to your home’s basis, which can lower your taxable profit when you sell.
“If you are making improvements on your house, it becomes another fantastic tax rule,” says Upchurch.
When home sale profit is tax-free
When you sell your main home, up to $250,000 of profit isn’t taxable. To qualify, you generally must have owned and lived in the home for at least two years. Those two years must fall within the five years before the sale. If you are married and file jointly, the limit can be twice that amount.
“Even people who have had a home for decades can see a big tax benefit,” he says. “If you sold your home for $600,000 more than you bought it in the 1960s but you put $150,000 improvements over the years, you still would have $450,000 that isn’t taxable for a married couple,” he says.
He says you just have to keep track of all your receipts in case you ever get audited.
“It’s just so much easier to put a receipt in a file until you need, instead of having to go back to someone and ask for a receipt from 1974,” he says.
But Clemens warns you to just check out how much benefit you would be getting tax-wise and if you can afford what you are buying.
Check your home buying eligibility. Start here (Nov 8th, 2026)
