If you’re a homeowner, the tax code may feel like a maze — especially when new laws arrive. The 2025 federal tax reform (H.R. 1, commonly called the One Big Beautiful Bill or OBBBA) brings prominent changes that affect both your homeownership costs and your federal tax return. The most significant changes are to the federal tax code since the 2017 Tax Cuts and Jobs Act (TCJA).
Here’s a straightforward, homeowner-friendly guide to what these changes mean and how to make them work for you.
What Does “Homeowner Tax Breaks” Really Mean?
Imagine your house as a big machine with two big cost levers: your property tax bill and your mortgage interest payments.
Property tax is what you pay your county/city each year.
Mortgage interest is the tax break you get when you itemize and deduct at the federal level.
The new law changes those levers:
It gives many homeowners in high-tax states more room to deduct state/local taxes (including property taxes) from their federal return.
It locks in the mortgage-interest deduction cap so homeowners in expensive markets get predictable tax treatment.
Big Change #1: SALT Deduction Cap Up — Bigger Room for High-Tax States
The “SALT” deduction means the part of your federal itemized deduction that covers state and local taxes, including property tax, income tax, or sales tax (you pick income or sales tax, not both).
What changed?
One of the biggest Trump property tax changes affects the state and local tax (SALT) deduction, which allows taxpayers who itemize to deduct certain state and local taxes from their federal taxable income.
For tax years beginning 2025: the cap on SALT deduction rises from $10,000 to $40,000 for most married couples filing jointly (and $20,000 for married filing separately), with a 1% annual increase.
It will revert to $10,000 in 2030 unless extended.
The cap is temporary: it applies for years 2025–2029 with modest indexing, and then reverts to the old $10,000 cap unless Congress acts.
There’s a phase-out for higher incomes: if your modified adjusted gross income (MAGI) is above a threshold (around $500,000 for joint filers), your SALT cap benefit may shrink.
Why homeowners should care: If you live in a state with high property taxes (e.g., New York, New Jersey, California) and you itemize your taxes, you can now deduct more of your state and local taxes on your federal return. This effectively frees up extra money or allows more deductions that were previously capped at $10,000.
Example calculation: If you paid $18,000 in state + local taxes and were capped at $10,000, you lost $8,000 of deduction. If you’re in a 24% tax bracket, that $8,000 meant ~$1,920 less in federal tax reductions. With the new cap of $40,000, you can deduct the full $18,000 — saving more.
(Note: This only helps if you itemize instead of taking the standard deduction.)
Significant Change #2: Mortgage Interest Deduction Gets Stability
The Mortgage Interest Deduction (MID) allows homeowners who itemize to deduct mortgage interest on a primary or second home (within certain limits). Under the 2017 Tax Cuts and Jobs Act (TCJA), the cap on acquisition debt was lowered to $750,000 for most filers (from $1 million) and was set to expire at the end of 2025.
What’s new?
The 2025 law makes that $750,000 cap (and $375,000 for those married filing separately) permanent.
For high-cost housing markets, this brings certainty — if you bought a large home or financed a large amount, you now know the cap won’t automatically drop.
That said, deductions still depend on itemizing and the mortgage interest paid. There are also two other related costs that fall under the MID when used for specific purposes:
Private Mortgage Insurance (PMI): Starting in tax year 2026, PMI premiums will be treated as deductible mortgage interest, as long as the total underlying debt stays within the $750,000 debt limit and homeowners earn less than $100,000 per year.
Since PMI is usually required when a buyer makes a down payment of less than
20%, this change offers small but useful relief during the early years of a mortgage when PMI charges are highest.
Home Equity Lines of Credit (HELOCs): Interest on HELOCs or home equity loans can also qualify for the MID, but only if the borrowed funds are used to buy, build, or substantially improve your main or second home. For example, financing a capital improvement.
Using a HELOC for unrelated personal expenses, such as travel or tuition, doesn’t meet the IRS’s definition and isn’t deductible.
What This Means for Homeowners in 2025
Together, the SALT and mortgage provisions reshape how homeowners manage their most considerable costs: taxes and mortgages. They can also ease the financial strain of homeownership for those who qualify by reducing after-tax costs and providing more explicit rules for long-term planning.
With many other TCJA provisions still set to sunset after the 2025 tax year, homeowners should now review their deductions, model next year’s tax exposure, and prepare for possible shifts in 2026.
Because of these changes:
If you live in a high-tax state and have historically itemized, you may see meaningful tax-return benefits starting with your 2025 return (filed in 2026).
If you always took the standard deduction, the benefit may be small or none — you’ll only benefit if itemizing now beats your standard deduction. Tools suggest many will still stick with the standard deduction.
Your local property tax bill is unaffected by the federal changes.
That means your escrow or tax payments to the local government stay the same unless local rates or assessments change, which you can lower via a property tax appeal.
Because the SALT cap bump is temporary, planning is lean. You may want to bunch deductions, accelerate payments, or otherwise optimize over the 2025-29 window.
Save More On Property Tax Payments With Ownwell
Recent Trump property tax updates can lower what you owe to the IRS. However, they don’t reduce the property tax bill your city or county sends each year or change your escrow payment. Local tax rates and home assessments determine that amount, and you can only change them through local action, such as appealing your property’s assessed value or confirming your exemptions.
At Ownwell, we know how stressful the property tax season can be. Our team reviews your property, identifies potential overcharges, and challenges inaccurate assessments, so you keep more of what’s yours.
Enter your property address today to see if you’re paying more in property taxes than you should. You’ll also learn how we can help with property tax compliance and property tax assessment appeals.
