Buying a home comes with plenty of decisions: paint colors, repairs, figuring out where the mysteriously slow Wi-Fi signal disappears.
But as 2025 wraps up and we look toward 2026, there’s one area worth revisiting for its real financial impact: the tax benefits tied to homeownership.
What You Can Deduct: Key House-Related Expenses
Owning a home opens the door to meaningful tax deductions, as long as you itemize.
State and Local Real Estate Taxes
Homeowners can deduct state and local real estate taxes from their tax liability. This deduction, subject to a $10,000 limit, can significantly reduce your overall tax burden.
Home Mortgage Interest
One of the most notable advantages of homeownership is the ability to deduct home mortgage interest within allowed limits. This deduction can offer substantial relief, making a considerable difference in your tax bill.
If you itemize, these two often make up the bulk of home-related deductions.
What Doesn’t Count: Non-Deductible Homeownership Costs
Some expenses may feel “tax-worthy,” but the IRS keeps the list narrow.
You cannot deduct:
- Homeowners or fire insurance, title insurance
- Mortgage principal payments
- Utility costs (gas, electricity, water)
- Wages paid to domestic help
- Depreciation on your home
- Most settlement or closing costs
- HOA or condo fees
- Internet or Wi-Fi costs
- Home repairs
- Forfeited deposits or earnest money that didn’t lead to a sale
If you’ve wondered why these everyday expenses don’t qualify, you’re not alone. But the IRS draws a firm line here.
Unlocking Hidden Tax Opportunities: Lesser-Known Deductions and Programs
Mortgage Interest Credit: A Boost for Lower-Income Homebuyers
The mortgage interest credit is a benefit for individuals with lower incomes aiming to achieve homeownership. You may be eligible if your state or local government issued you a Mortgage Credit Certificate (MCC). If so, you can claim this credit each year for part of the mortgage interest paid, separate from the standard mortgage interest deduction.
Homeowners Assistance Fund
Some homeowners impacted financially after January 21, 2020, may still qualify for help under this fund. It assists with expenses tied to your primary residence with the goal of preventing foreclosure or displacement. Eligibility continues to vary by state as programs wind down at different times, so check availability before assuming funds remain active.
Minister’s or Military Housing Allowance
If you receive a nontaxable housing allowance, you can still deduct home mortgage interest and real estate taxes. The IRS does not require reducing these deductions due to the allowance.
Looking Ahead: Make Your Home Part of a Smarter Tax Plan
As we move into 2026, maximizing homeownership benefits means knowing which deductions apply, which expenses to leave off the list, and whether lesser-known programs could help your situation.
Your home is likely one of your biggest investments. Understanding its tax advantages can make a meaningful difference at filing time.
At Smith Patrick CPAs, we’re here to help homeowners navigate these rules, avoid surprises, and plan with confidence, not just for this tax year, but for the long term.
Check out these resources from the IRS on this topic:
More Information
If you have questions, contact us to discuss your situation.
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Debra Annis
Debra Annis brings 40+ years of experience in accounting and tax. She helps clients overcome obstacles with cash flow, planning, stability and growth. She enjoys working with clients to find solutions that achieve their plans and avoid paying unnecessary tax.
About Smith Patrick CPAs
Smith Patrick CPAs is a boutique, St. Louis-based, CPA firm dedicated to providing personal guidance on taxes, investment advice and financial service to forward-thinking businesses and financially active individuals. For over 30 years, our firm has focused on providing excellent service to business owners and high-net worth families across the country. Investment Advisory Services are offered through Wealth Management, LLC, a Registered Investment Advisor.
