One Big Beautiful Bill: SALT deduction and other changes for homeowners

As a homeowner, you know that your taxes can get complex. Now, with the One Big Beautiful Bill Act (OBBBA) signed into law, you may be wondering what changes you need to be aware of right now and when it’s time to file your taxes next year.

In this article, we’ll cover the changes homeowners will want to know about Big Beautiful Bill, including:

• The SALT deduction ― Increase to the deduction cap starting in 2025
• Qualified Residence Interest Deduction (Mortgage Interest Deduction) ― Provisions made permanent
• Residential Energy Credits (solar panel deduction) ― Expiring at the end of 2025

SALT deduction cap bill details

Let’s start with the SALT tax deduction. It’s not a deduction on the home itself but has to do with property taxes on the state and local level.

What is the SALT deduction?

The SALT deduction — short for State and Local Tax deduction — lets taxpayers who itemize deduct certain taxes paid to state and local governments from their federal taxable income. These can include property taxes, income taxes, or sales taxes.

For homeowners, this deduction can be especially valuable. Property taxes are often a significant annual expense, and the SALT deduction helps reduce the federal tax burden by allowing you to write off some of those costs if eligible.

What is the SALT deduction cap?

The Tax Cuts and Jobs Act of 2017 introduced an upper limit to the deduction, known as the SALT deduction cap. Since 2018, taxpayers have only been able to deduct up to $10,000 ($5,000 if Married Filing Separately) in combined state and local taxes.

What is the SALT deduction increase in the Trump tax plan?

The new law increases the cap for tax years 2025 to 2029, which in turn could potentially increase your tax savings on the federal level.

Specifically, the law changes include the following:

• The cap is raised to $40,000 for incomes under $500,000 ($250,000 for Married Filing Separately).
• If your Modified Adjusted Gross Income (MAGI) is over $500,000, then the cap is gradually reduced by 30% (until it reaches $10,000).
• The cap and income threshold will increase 1% annually.

How the SALT deduction cap changes could affect you

The SALT deduction cap increase could impact your tax filing strategy — meaning it could influence whether itemizing deductions or taking the standard deduction is more beneficial for you. If you’ve been affected by the SALT cap in previous years, it may be worth reevaluating your approach. If you live in a high-tax state and itemize your deductions, lifting the SALT cap could significantly reduce your federal tax bill. For example, if you pay $18,000 in state and local taxes, under the previous law, you were only able to deduct $10,000. With the new, increased SALT deduction cap, you could deduct the full amount.

Other homeowner-related tax changes in the OBBBA

Next let’s cover two other important changes from the Trump tax plan for 2026 – the Qualified Residence Interest Deduction (also known as the Mortgage Interest Deduction) and Residential Energy Credits.

Mortgage interest deduction limit is now permanent

If you’re paying for a home loan, you may know that the interest you pay on your loans is generally tax deductible (for home acquisition debt) if you itemize. However, there is a cap to the amount of interest you can deduct. The limit was set to expire at the end of 2025, but the OBBBA makes it permanent.

The threshold will continue to be:

• $750,000 (for most filers)
• $375,000 (for Married Filing Jointly)

Additional mortgage interest related changes

The OBBBA made other important changes to what counts as mortgage interest. Like the limit above, these provisions take effect in tax year 2026.

• Private Mortgage Insurance (PMI): This type of insurance is typically required for conventional loans when the borrower’s downpayment is less than 20% of the purchase price. PMI associated with acquisition debt will be treated as mortgage interest.
• Home Equity Loans: Interest on home equity loans remains excluded from the definition of “qualified residence interest.” In other words, this will continue to be not deductible.

Residential Energy Credits

Homeowners who made energy-efficient home improvements, such as adding solar panels or energy-efficient windows or doors, should take note of credits that are expiring at the end of 2025.

This includes:

• Energy Efficiency Home Improvement Credit
• Residential Clean Energy Credit The law states that any purchases made after Dec. 31, 2025, will no longer qualify for these credits.

Rely on H&R Block to help you navigate taxes as a homeowner

While tax changes can be stressful, you don’t have to go it alone. Trust the expertise of H&R Block to help make sense of your taxes.

— H&R Block