The dust has settled on the One Big Beautiful Bill Act (often called the “Big Beautiful Bill”), signed into law in July 2025. This major tax legislation has reshaped the federal tax code, making many provisions from the 2017 Tax Cuts and Jobs Act permanent while introducing temporary expansions and eliminating certain credits. For homeowners, the changes—primarily affecting 2025 tax returns (filed in 2026) and beyond—bring a mix of opportunities and trade-offs.
To unpack what this means in practical terms, we draw insights from tax expert Keith Schroeder, a Wisconsin-based CPA who runs The Wealthy Accountant blog. NewHomeSource, a leading new home listings site with customer reviews, consulted Schroeder to highlight the key homeowner impacts for 2026 and the years ahead.
Note: These updates generally apply to tax years starting in 2025 (returns filed in 2026), unless specified otherwise.
SALT Deduction: A Major Boost for High-Tax State Homeowners
The most significant homeowner-friendly change is the expansion of the state and local tax (SALT) deduction.
Since 2018, the SALT cap limited deductions for state income taxes, property taxes, and certain other local taxes to $10,000. Under the new law, this cap jumps to $40,000 for 2025 (and $40,400 in 2026), with 1% annual increases through 2029 before reverting to $10,000 in 2030.
“This is the biggest change benefiting homeowners for 2025,” Schroeder explains. “For those in high-tax states, it’s a headline-grabber.”
However, caveats apply:
- The deduction covers combined SALT payments (property taxes, income taxes, personal property taxes).
- It phases out for higher earners (starting around $500,000 modified AGI, fully phasing out at higher levels in some cases).
- Most importantly, you must itemize deductions to claim it. Many homeowners opt for the standard deduction (boosted under recent laws), making the higher SALT cap irrelevant for them.
- Renters and lower-income or moderate-property-tax homeowners often see little to no direct benefit.
In high-tax areas like parts of California, New York, or New Jersey, itemizing homeowners with substantial property taxes could see meaningful savings—but it’s not universal.
PMI Deduction Returns: Relief for Low-Down-Payment Buyers
Private mortgage insurance (PMI) premiums are once again deductible as qualified mortgage interest, starting in 2026 (for tax year 2026 returns filed in 2027). This provision, which expired after 2021, has been reinstated and made permanent under the new law.
Qualification requires adjusted gross income (AGI) below $100,000 (single or joint), phasing out completely at $110,000. When previously available, average deductions hovered around $2,364.
This helps conventional-loan buyers who put down less than 20% and pay PMI. FHA mortgage insurance follows different rules and doesn’t qualify the same way.
“For first-time buyers stretching to afford a home with a smaller down payment, this takes some sting out of monthly costs,” Schroeder notes. “It won’t transform budgets, but every bit helps.”
Mortgage Interest Deduction Limit: Now Permanent at $750,000
The limit on deductible mortgage interest—capped at $750,000 of debt ($375,000 for married filing separately) since 2018—has been made permanent. Without this, it would have reverted to $1 million after 2025.
“Most homeowners have lived with this since 2018, so it’s business as usual,” Schroeder says. “It removes uncertainty.”
Home equity loan interest remains nondeductible unless used for home improvements (and within the $750,000 cap). As always, this only matters for itemizers.
Income property owners might consider shifting debt strategically, but for primary residences, it’s steady.
Energy Credits Expire: No More Federal Incentives for Upgrades
Not every change favors homeowners. The Residential Clean Energy Credit (for solar, wind, geothermal, etc.) and the Energy Efficient Home Improvement Credit expired at the end of 2025. If you installed qualifying upgrades in 2025, claim them on your 2025 return—but nothing similar is available for 2026 onward.
Schroeder advises focusing on economics over lost credits: “The tax credit tail shouldn’t wag the dog. Ask if the investment has good ROI. Energy costs are rising, so efficiency upgrades can still pay off long-term through lower bills and increased home value.”
Advice for First-Time Buyers in 2026
Schroeder emphasizes fundamentals over tax incentives alone. Needless to say, all real estate is local. Therefore, our market here in South Florida can be dramatically different than in other parts of the country.
Taxes are “frosting on the cake”—helpful, but not the sole driver. If a deal only works because of tax breaks (or falls apart without them), reconsider.
Summary
The 2026 tax landscape offers targeted relief—especially via the expanded SALT cap for itemizers in high-tax states and revived PMI deductions for certain buyers—while solidifying rules like the $750,000 mortgage interest limit and ending energy credits.
Yet benefits aren’t automatic or equal. Many homeowners stick with the standard deduction, and changes favor those who itemize with higher property taxes or qualifying PMI.
“Every situation is different,” Schroeder cautions. “Don’t assume your neighbor’s or coworker’s taxes match yours. Do your due diligence—neglecting it can lead to trouble fast.”
Consult a tax professional to see how these shifts apply to your specific circumstances, as individual factors like income, location, filing status, and mortgage details make all the difference.
Are you thinking of buying or selling real estate in the South Florida area? We can help! Contact Natasha at Live South Florida Realty, Inc. today! Also, don’t forget to download the free Florida Home Search App for your smartphone or tablet.
