What Homeowners Need to Know About the New OBBBA Tax Law
One Big Beautiful Bill Act (OBBBA) is bringing sweeping changes to the U.S. tax code—including several that directly affect homeowners. Whether you itemize or take the standard deduction, these updates could impact your 2025 tax return and your long-term planning.
Here’s what you should know:
🏠 Expanded SALT Deduction Limits
The TCJA had previously capped the state and local tax (SALT) deduction at $10,000. This particularly impacted homeowners in high-tax areas or those owning multiple properties.
Under the OBBBA:
- From 2025–2029, the SALT deduction limit increases to $40,000 ($20,000 for married filing separately), with 1% annual inflation adjustments.
- In 2030, the limit reverts back to $10,000 unless Congress acts again.
- BUT—there’s a catch: If your modified adjusted gross income (MAGI) exceeds $500,000 ($250,000 if married filing separately), your deduction begins to phase out. At or above $600,000 MAGI, the deduction drops back to the original $10,000 cap.
Example:
A couple earning $550,000 with $60,000 in SALT would be limited to a $25,000 deduction due to the phaseout.
🔄 Workarounds for Pass-Through Entities
States with SALT workaround laws still allow pass-through entities (like partnerships and S-corps) to pay SALT at the entity level—providing a potential workaround for individual SALT deduction limits.
🏡 Mortgage Interest Deduction Limits Made Permanent
The OBBBA permanently retains the TCJA rule limiting home mortgage interest deductions to the first $750,000 of acquisition debt ($375,000 for married filing separately).
It also continues to disallow deductions for home equity loan interest unless the loan is used to improve your home—and even then, the interest must fall under the $750,000 limit.
Grandfathered Loans:
Loans taken out before December 16, 2017, or under contracts before that date (with a closing by April 1, 2018), may still qualify under the old $1 million limit.
🏠 New Deduction for PMI Premiums
Starting in 2026, you can deduct private mortgage insurance (PMI) premiums—if your adjusted gross income (AGI) is below:
- $100,000 (single or joint)
- $50,000 (married filing separately)
- The deduction phases out completely at:
- $110,000 for most filers
- $60,000 for separate filers
🌿 Energy-Efficient Home Credits Expiring Early
Thinking about upgrading your HVAC or going solar? You may want to act in 2025.
The OBBBA accelerates the expiration of two key credits:
- Section 25C – Energy Efficient Home Improvements
Expires after 2025 (previously extended to 2032)
2025 credit limits:
- $2,000 for heat pumps, biomass systems
- $1,200 for other upgrades
- $600 max per item for windows and energy property
- $500 total for exterior doors
- $150 for home energy audits
Section 25D – Residential Clean Energy Credit
Expires after 2025 (was extended to 2034)
Covers 30% of costs for:
- Solar panels
- Wind turbines
- Geothermal systems
- Battery storage
- Fuel cells
⚠️ A Note on the Alternative Minimum Tax (AMT)
The AMT exemptions were expanded under the TCJA, but OBBBA makes some less favorable changes starting in 2026:
- Phaseout thresholds reset to $500,000 (single) and $1 million (joint)
- Phaseout rate increases from 25% to 50%, meaning more taxpayers could face the AMT
- Homeowners taking advantage of expanded SALT deductions could be especially impacted, as SALT is not deductible under AMT rules
📝 What This Means for You
If you’re a homeowner, these tax changes could significantly influence your strategy for:
- Itemizing vs. taking the standard deduction
- Timing home improvements
- Managing income thresholds
- Taking advantage of expiring credits
2025 may be the last year to capture key tax benefits for energy improvements and expanded deductions before some provisions sunset or tighten.
💬 Let’s Talk Strategy
The OBBBA is over 400 pages long and full of detailed provisions. Our team at Bland & Associates is here to help you understand how these changes affect your tax plan as a homeowner. Contact us to schedule a personalized consultation.