What Are the Tax Advantages of Buying a Home?

Buying a home is a financial decision, but it’s also a tax decision — one that changed meaningfully with recent tax law updates. Here’s a clear breakdown of the real tax advantages homeownership offers right now, what changed recently, and what actually matters depending on your situation.

A quick note before we dive in: I’m a loan officer, not a CPA. This is a solid overview to help you understand the landscape, but your specific numbers should always be run by a licensed tax professional before you make decisions based on them.

Mortgage Interest Deduction

This is the deduction most people think of first, and it’s now a permanent part of the tax code. If you itemize your deductions, you can deduct interest paid on up to $750,000 of mortgage debt used to buy, build, or substantially improve your home ($375,000 if married filing separately). Homes purchased before December 15, 2017 are grandfathered in at the older $1 million limit.

One notable recent change: starting in 2026, private mortgage insurance (PMI) is treated as deductible mortgage interest again. If you’re paying PMI on a conventional loan with less than 20% down, that cost may now be deductible along with your regular mortgage interest, subject to the same itemization requirements.

The SALT Deduction Cap Just Got a Lot More Useful

This is genuinely the biggest recent change for homeowners, and it matters enormously in California specifically. The State and Local Tax (SALT) deduction — which covers property taxes plus either state income tax or sales tax — was capped at just $10,000 from 2018 through 2025. As of 2025 through 2029, that cap has jumped to $40,000 for joint filers ($20,000 for single filers), with small annual increases built in through 2029.

For California homeowners, where property taxes and state income taxes routinely exceed the old $10,000 cap by a wide margin, this change alone can restore thousands of dollars in deductions that were previously capped off and unusable. There is an income-based phase-out on the higher SALT cap for higher earners, so this benefit isn’t unlimited — if your income is well into six figures, it’s worth having a CPA run the exact phase-out math for your situation.

Should You Actually Itemize? Do the Math First

Here’s the part a lot of homeowners skip: none of these deductions matter unless your total itemized deductions exceed the standard deduction, which is itself fairly high — roughly in the low-to-mid $30,000s for married joint filers, and around half that for single filers, as of the current tax year.

Add up your likely mortgage interest, your property taxes and state income tax (up to the new $40,000 SALT cap), and any charitable giving. If that total clears the standard deduction, itemizing saves you real money. If it doesn’t, you’re better off taking the standard deduction and not worrying about tracking these homeowner-specific write-offs at all. This calculation is worth revisiting every year, since your mortgage balance, local tax rates, and the standard deduction itself all shift over time.

The Capital Gains Exclusion When You Sell

This is one of the most valuable, and most underrated, tax advantages of homeownership — and it hasn’t changed. When you sell your primary residence, you can exclude up to $250,000 of capital gains from taxable income if you’re single, or up to $500,000 if you’re married filing jointly, provided you’ve owned and lived in the home as your primary residence for at least two of the last five years before the sale.

In a market like Southern California, where home values have appreciated substantially, this exclusion can be worth an enormous amount over time. A married couple who bought a home years ago and has seen significant appreciation could sell and walk away with up to $500,000 in gains completely tax-free — a benefit that simply doesn’t exist for most other investments.

Mortgage Points Are Often Deductible Too

If you paid points (prepaid interest, each point equal to 1% of your loan amount) to secure a lower interest rate when you purchased your home, those points are generally deductible in the year you paid them, provided certain IRS requirements are met — the loan must be for your primary residence, and the practice of paying points must be an established business practice in your area, among other conditions. If you refinance rather than purchase, points are typically deducted gradually over the life of the loan instead of all at once.

Home Equity Loan or HELOC Interest — With a Catch

Interest on a home equity loan or HELOC can still be deductible, but only under a specific condition: the funds must be used to buy, build, or substantially improve the home securing the loan. If you use a HELOC to pay off credit card debt, fund a vacation, or cover expenses unrelated to the home itself, that interest is not deductible under current rules — a meaningful change from the pre-2018 tax code, where home equity interest was deductible regardless of how the funds were used.

Putting It All Together

The real headline here: recent tax law changes have made homeownership meaningfully more tax-advantaged than it’s been in years, particularly for California homeowners who were boxed out by the old $10,000 SALT cap. Between the mortgage interest deduction, the now-much-larger SALT cap, the newly deductible PMI, the capital gains exclusion on sale, and points deductibility, there’s a real case for itemizing that didn’t exist for a lot of homeowners just a couple of years ago.

But every one of these benefits depends on your specific numbers — your loan amount, your property tax bill, your income, and whether itemizing actually beats the standard deduction in your case. This is exactly the kind of thing worth sitting down with a CPA to run precisely, especially the year you buy or the year you’re deciding whether to itemize.

Thinking About Buying? Let’s Talk Numbers

While I can’t give you tax advice, I can absolutely walk you through what your monthly payment, mortgage interest, and property tax numbers would actually look like on a home you’re considering — the real figures your CPA would need to help you understand your specific tax picture.

Adam Tice Senior Loan Officer, Mark 1 Mortgage — Team Tice NMLS #289398 📞 626-825-2326 ✉️ adam@adamtice.com 🌐 adamtice.com

This post is for general informational purposes only and is not tax advice. Consult a licensed CPA or tax professional regarding your specific situation.