President Donald Trump signed the One Big Beautiful Bill Act into law in July 2025, a major tax and spending package that will shape federal taxes in the 2026 filing year and beyond.
This law includes several important changes that may affect homeowners when they prepare their 2025 tax returns in early 2026. Below are the key points every homeowner should know:
1. Higher SALT Deduction Cap for Property Taxes
Under the new law, the state and local tax (SALT) deduction cap increases significantly. Instead of the previous $10,000 limit, many taxpayers can now deduct up to $40,000 of state and local taxes (including property taxes), with phased limits for higher incomes. This change could make itemizing more beneficial for homeowners in high-tax states.
If you want to understand how property taxes and other deductible taxes can affect your return, the IRS explains real estate tax deductions here:
🔗 https://www.irs.gov/faqs/itemized-deductions-standard-deduction/real-estate-taxes-mortgage-interest-points-other-property-expenses
2. Mortgage Interest Deduction Clarifications
The law also maintains and adjusts some mortgage-related deductions. For example, the mortgage interest deduction remains available on mortgage debt up to $750,000 for most filers and may allow related insurance premiums as part of deductible interest.
3. Clean Energy Credits End After 2025
Several energy-focused tax credits for home improvements, like solar panels and other clean energy upgrades, were phased out at the end of 2025. Homeowners claiming these credits on their 2025 tax return (filed in 2026) must show that qualifying work was completed by December 31, 2025 to receive the benefit.
The IRS provides guidance on claiming residential energy tax credits here:                  🔗https://www.irs.gov/credits-deductions/individuals/residential-energy-efficient-property-credit
4. Standard Deduction and Other Individual Tax Rules
The law also continues some broader tax changes that affect most taxpayers, such as higher standard deductions and adjustments in tax brackets that help protect income from inflation. These changes will influence how much homeowners pay in federal income taxes and whether they itemize or take the standard deduction.
For official IRS information on standard deductions and how they may apply to you:
🔗 https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill
Why This Matters for Homeowners
These updates mean that many homeowners could see:
• More deductible property and state tax amounts
• Changes in eligibility for itemized deductions vs standard deduction
• A last opportunity for certain energy credits on home improvements
Planning ahead allows you to take full advantage of the benefits and avoid surprises at tax time.
Nealy Knows Tip
Keep detailed records of your property taxes, mortgage interest, and home improvement expenses. If you made energy-efficient upgrades in 2025, be sure the work was completed before year-end so you can claim the credit on your 2025 return.
📞 Need help navigating these tax changes for homeowners?
Schedule your Free 15 Minute Tax Assessment with Nealy Knows Tax Services and make this your most prepared and advantageous tax season yet.