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Owning a home has always come with benefits—both emotional and financial. But the 2025 tax changes for homeowners are giving buyers, longtime homeowners, and investors more reasons to celebrate.
From a boost to the SALT deduction to the return of tax-deductible mortgage insurance, these changes could add up to thousands in savings. They’re designed to help families in high-tax states, support first-time homebuyers, and encourage housing development in communities nationwide.
Of course, at APM, we are mortgage lenders, not tax professionals. But we wanted to make sure you have this important information so you can make the best real estate investments possible. Always check with your tax advisor before making important financial decisions.
Here’s a detailed look at five of the biggest updates—and how you may be able to make the most of these new tax benefits for homeowners this year.
What Homeowners Need to Know About the 2025 Tax Changes
1. An increase in the SALT deduction cap
The state and local tax (SALT) deduction allows taxpayers who itemize their returns to deduct certain state and local taxes—including property taxes, state income taxes, and some personal property taxes—from their federal taxable income. For many homeowners, this deduction helps offset the high cost of living in a state with significant property or income taxes.
If you live in a high-tax state, you’ve likely felt the pinch of the $10,000 cap on SALT deductions. For years, this limit made it difficult for homeowners in states like California, New York, and New Jersey to fully deduct their property and state income taxes.
With the SALT deduction 2025 update, the cap has risen to $40,000 and will be adjusted annually for inflation through 2029.
For many families, this is more than just a policy tweak—it could mean thousands of dollars in annual tax savings. For example:
- In most cases, a California homeowner with $35,000 in combined property and state income taxes will be able to deduct the full amount, instead of just $10,000.*
- Over five years, that could mean tens of thousands in tax savings.
This change benefits those in metropolitan areas with high property taxes, where annual bills often far exceed the old cap.
2. The mortgage interest deduction becomes permanent
For decades, the mortgage interest deduction has been one of the most valuable tax benefits for homeowners. But uncertainty about whether it would remain left many planning cautiously.
The mortgage interest deduction 2025 update brings stability by making this benefit permanent for:
- Loans up to $750,000
- Loans up to $1 million for mortgages secured before December 16, 2017
Why does this matter?
If you have a $600,000 mortgage at 6% interest, you’ll pay roughly $36,000 in interest during your first year alone. Being able to deduct that amount could substantially lower your taxable income, saving thousands depending on your tax bracket.
For anyone considering buying or refinancing in 2025, this change allows you to plan your housing costs with confidence.
3. Mortgage insurance premiums are tax-deductible again
For homeowners who bought with less than 20% down, paying for private mortgage insurance (PMI) or a mortgage insurance premium (MIP) is common. Until now, those payments couldn’t be deducted, increasing the cost of homeownership.
With tax-deductible mortgage insurance officially reinstated, these premiums can once again be deducted.
The average homeowner who qualifies could save around $2,364 per year by claiming this deduction. For first-time homebuyers, this tax break can make monthly costs more manageable and homeownership more attainable.
To take advantage, make sure you:
- Itemize your deductions (this is not available for the standard deduction).
- Keep records of your annual PMI or MIP payments.
4. More investment in affordable housing
2025 also brings an expansion to the Low-Income Housing Tax Credit (LIHTC) program. This federal initiative incentivizes developers to create and preserve affordable rental housing. The new funding is projected to:
- Create or preserve over 1 million affordable rental units by 2035.
- Encourage developers to build lower cost rental housing in markets struggling with shortages.
While this primarily benefits renters, it also supports a healthier housing market. By increasing rental availability, the program may help ease buyer competition in some markets, giving prospective homeowners more options.
5. Stability for real estate investors and developers
Real estate professionals received some long-awaited certainty in 2025. Permanent real estate tax incentives from the Tax Cuts and Jobs Act (TCJA) will remain in place, including:
- The 20% pass-through deduction for qualified business income
- Favorable interest expense rules for real estate investors and small businesses
For property developers, landlords, and small real estate companies, these measures mean long-term predictability for tax planning, acquisitions, and growth strategies.
What These 2025 Tax Changes Mean for You
Whether you’re a first-time homebuyer, an experienced homeowner, or a property investor, these updates can improve your financial outlook:
- High-tax state homeowners: A higher SALT deduction cap means more annual savings.
- Homeowners with mortgages: Continued deductions for mortgage interest and PMI help lower taxable income.
- First-time buyers: More affordable housing options and new deductions may make buying a home more achievable.
- Investors and developers: Greater tax certainty and incentives may enable growth and long-term planning.
How to Take Advantage of These 2025 Changes
- Review your tax strategy early: Work with a tax professional to calculate potential savings. Adjusting your withholdings could help you see the benefits throughout the year, not just at tax time.
- Consider your next housing move: The mortgage interest deduction 2025 update means that buying or refinancing could be more advantageous.
- Track every deduction: From PMI to property taxes, detailed recordkeeping ensures that you maximize your returns.
- Research local and federal programs: Many states also offer property tax credits, energy-efficiency rebates, or down payment assistance that stack with these federal changes.
Plan Ahead for Your Homeownership Goals
These 2025 tax updates make homeownership and real estate investment even more rewarding. If you’ve been considering buying, refinancing, or expanding your real estate portfolio, now is the time to see how these benefits can work for you.
Connect with a local APM Loan Advisor today to explore your options and take full advantage of these homeowner-friendly updates.
*The SALT cap is $40,000, but adjusted for inflation through 2029. Depending on when the inflation adjustment takes effect, the effective cap may be slightly higher or lower in a given year. For example, if the adjustment hasn’t caught up yet by 2025, the cap may be slightly below $40,000 in practice. Other deduction limits or phase-outs may occur. For high-income taxpayers, there are sometimes limitations or phase-outs on certain deductions (depending on future IRS rules).
All tax-related information provided is for general informational purposes only and should not be considered tax advice. For specific questions or guidance regarding taxes, please consult a qualified tax advisor or a licensed tax professional.
