Homeownership has long been associated with a range of financial advantages—including some substantial tax breaks. Now, thanks to a sweeping new federal tax reform law signed on July 4, 2025, those benefits have become even more compelling.
Under the new law, homeowners and homebuyers can save significantly more money by deducting a larger portion of their state and local taxes (SALT), including property taxes. Whether you're already a homeowner or thinking about buying, this reform is worth your attention.
Standard vs. Itemized Deductions: What’s Changed?
When filing your federal tax return, you have two choices: take the standard deduction or itemize your expenses. For the 2025 tax year, the standard deductions are:
- $15,750 for single filers
- $31,500 for married couples filing jointly
- $23,625 for heads of household
Typically, most taxpayers use the standard deduction. But the recent reform significantly increases the SALT cap, meaning more homeowners will benefit by itemizing their deductions instead. Why? Because higher allowable deductions mean lower taxable income—and that means you keep more of your money.
Quadrupled SALT Deduction: A Game-Changer
The new law raises the SALT deduction cap to $40,000, up from $10,000, beginning with 2025 returns. This increase will phase in slightly higher through 2029 and then revert back—unless extended by Congress. The change especially helps homeowners in high-tax areas like New Jersey, where property taxes are a major expense.
Note: There is a phasedown for taxpayers earning over $500,000 in modified adjusted gross income.
The law also preserves the mortgage interest deduction—another major perk for homeowners. Together, these deductions can create powerful tax advantages, especially for those financing their homes or paying significant local taxes.
Why These Deductions Matter
The ability to deduct mortgage interest and SALT from your federal return has been a key homeownership incentive for over a century. But changes in the 2017 Tax Cuts and Jobs Act (TCJA) limited SALT deductions to $10,000, pushing more people to choose the standard deduction. That shift caused a drop in itemized filers—from 31% in 2017 to just 9% in 2020.
With the new law, that trend may reverse. Homeowners—particularly in higher-tax states like New Jersey—stand to benefit most. That’s why the National Association of REALTORS® (NAR) fought hard to restore the deduction. NAR consistently supports policies that improve affordability and promote stronger communities through homeownership.
How to Claim These Deductions
To take advantage of these tax breaks, you’ll need to itemize using Schedule A on IRS Form 1040. Here are some commonly deductible expenses:
- Mortgage interest
- Property, state, and local income taxes
- Charitable donations
- Medical/dental expenses above a set threshold
- Private mortgage insurance premiums (also newly restored)
Remember to keep detailed records, receipts, and statements. Good documentation ensures you receive every dollar you’re entitled to and protects you if audited.
Consult the Experts
Keep in mind that tax rules can vary by state and locality. It's a good idea to speak with your real estate professional, tax advisor, or attorney to make sure you’re maximizing your benefits and complying with current laws.
For more information on how tax reform impacts homeowners, visit facts.realtor.
