New Tax Benefits from the OBBB Act for Homeowners

The One Big Beautiful Bill (OBBB) Act, enacted earlier this year, introduces several significant tax deductions poised to benefit homeowners between 2026 and 2028. Notably, the Act provides a new deduction for private mortgage insurance (PMI) premiums, aligning these payments with deductible mortgage interest for eligible homeowners. This provision targets taxpayers with an adjusted gross income (AGI) under $100,000 for joint filers, or $50,000 for those married filing separately, gradually phasing out as AGI reaches $110,000. Mortgage balances qualifying for this deduction are capped at $750,000, or $375,000 for separate filers.

The OBBB also restores deductions for home equity loans (HELs) and home equity lines of credit (HELOCs) starting in 2026, provided funds are used for property acquisition or improvement. Taxpayers can again deduct interest on home loan debts up to $750,000 for first and second mortgages, while separate filers face a limit of $375,000. Additionally, homeowners can deduct mortgage discount points to reduce interest rates on itemized 2026 tax returns, alongside property taxes, HOA fees, and home improvements.

Moreover, home office expenses present another potential deduction, with the IRS offering a simplified method that deducts $5 per square foot of office space, up to 300 square feet, yielding a maximum deduction of $1,500. Starting in 2026, taxpayers may also avoid capital gains tax on profits from selling a primary residence if they have lived there for at least two of the past five years. Individuals can exclude up to $250,000 of profit from taxation, while married couples can exclude up to $500,000. These changes, along with the increased State and Local Tax (SALT) deduction cap to $40,000, open avenues for greater tax savings. Industry professionals are advised to remain informed on these developments to enhance tax planning and regulatory compliance strategies effectively.