Tax Checklist for Buying a Home

By Tom, CPA · Updated October 27, 2026

Part of: Tax Planning

TL;DR: Most buyers get less of a write-off than promised, since itemizing must beat a $32,200 joint standard deduction. Points and prepaid interest are usually deductible; most closing costs go into basis. Keep improvement receipts, and note federal energy credits ended after 2025.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

The tax code is 4 million words long, and the real estate agent will summarize them as "you get a big write-off." Usually you do not. Since the standard deduction roughly doubled, most buyers get little or no extra federal benefit from mortgage interest. A home is still a fine thing to own; just buy it for the right reasons and keep the right records. This checklist covers before, at and after closing. Figures are for 2026, as of Oct 2026.

CPA Warning Label: Points deductibility has specific requirements, and energy credits changed recently. Confirm with Form 1098 and current IRS guidance before claiming.

Before you buy

• Check whether you will itemize. The 2026 standard deduction is $32,200 married filing jointly and $16,100 single. Add expected mortgage interest, property and state income taxes (up to the SALT cap of $40,400, reduced for MAGI above $505,000), and charity. If the total does not clearly exceed the standard deduction, the "write-off" is worth little. See the mortgage interest deduction guide.
• Know the loan limit. Interest is deductible on up to $750,000 of acquisition debt ($375,000 married filing separately), now permanent.
• Funding the down payment from an IRA: first-time buyers (no home owned in the past two years) can withdraw up to $10,000 lifetime from an IRA without the 10% early withdrawal penalty. Income tax still applies to pre-tax money. Roth IRA contributions can always come out tax- and penalty-free.
• 401(k) loans avoid taxes if repaid, but leaving your job can accelerate repayment.
• Selling stock for the down payment? Plan the timing around long-term holding periods and the 0% capital gains bracket (up to $98,900 taxable income joint in 2026).
• Gifts from parents are not income to you; parents giving more than $19,000 each per recipient in 2026 file a gift tax return but rarely owe tax.

At closing

• Points paid to buy down the rate on a main home purchase are generally deductible in full the year paid if the requirements in Topic 504 and Publication 936 are met, including that points are customary in your area and computed as a percentage of the loan. Seller-paid points can count as yours.
• Prepaid mortgage interest from closing to month-end is deductible.
• Property taxes are deductible for the portion of the year you owned the home, whoever paid them at closing.
• Mortgage insurance premiums are again treated as deductible interest starting in 2026, phasing out by 10% for each $1,000 of AGI over $100,000.
• Most other closing costs (title insurance, recording fees, transfer taxes, legal fees) are not deductible. They are added to your basis, which reduces gain when you sell.
• Keep the closing disclosure forever, or at least until several years after you sell.

After you move in

• Start a basis file. Save receipts for improvements that add value or extend life: a new roof, additions, kitchen remodels, HVAC. Repairs and maintenance do not count. Basis matters if your gain ever exceeds the exclusion.
• Energy credits ended. The home improvement credit (25C) does not apply to property placed in service after December 31, 2025, and the residential clean energy credit (25D) ended for expenditures after that date. Solar panels installed in 2026 get no federal credit.
• Home office: W-2 employees cannot deduct a home office. Self-employed owners may, with depreciation that is recaptured on sale.
• Renting a room creates rental income and allocation work. See converting a home to a rental.
• Adjust your W-4 if you will itemize, so withholding reflects the deductions.
• Property tax bills and escrow: you deduct property taxes when the lender actually pays them from escrow, not when you fund the escrow account. Your Form 1098 or escrow statement shows the amount.
• Refinancing later? Points on a refinance are generally deducted over the life of the loan, not all at once, and cash-out amounts above the old balance count as acquisition debt only if used to substantially improve the home.
• Check Form 1098 each January for interest, points and mortgage insurance.

Illustration: does the deduction help?

Illustration: a married couple buys a $500,000 home in 2026 with a $400,000 loan at 6.5% and pays 1 point ($4,000). First full-year numbers:

They exceed the $32,200 standard deduction by about $14,600 in year one, worth about $3,200 at 22%. In later years, without points and with interest declining, the excess shrinks to roughly $10,000 and keeps falling. Charity is also reduced by the 2026 floor of 0.5% of AGI.

A renter with the same income gets the full $32,200 anyway. The real tax advantage of a home comes on the sale: up to $500,000 of gain tax-free for a married couple.

Assumptions: AGI $180,000, so mortgage insurance would be fully phased out; no state itemizing effects.

Longer-term planning

• Home sale exclusion: live in it two of five years before selling to exclude up to $250,000 ($500,000 joint). See the home sale exclusion.
• Vacation homes have separate rules for personal use and rental days. See vacation home rental rules and 1031 exchanges for vacation homes.
• Estate planning: title choice (joint, trust, community property) affects step-up at death. See estate planning basics.
• Retirees downsizing: a large gain above the exclusion can raise Medicare premiums two years later. See IRMAA planning.

None of these rules are reasons to buy or skip a home. They are reasons to keep a folder, and to be skeptical when anyone promises the mortgage will pay for itself at tax time.

Back to the tax planning hub.