Despite what some might say, taxes are neither hot nor sexy. But, if you think saving $1000s is hot or sexy, read on for housing-related tax changes in effect for 2026.

SALT Deduction Cap

Maybe the most important change for Californians is the increase to what's called the SALT deduction cap.

SALT stands for State and Local Taxes, which includes property taxes and state income taxes. For many California homeowners, especially in Orange County, the previous cap of $10,000 meant a chunk of their taxes weren't deductible at the federal level.

A higher cap doesn’t mean everyone will get a windfall, but it does mean homeowners can deduct up to $40,000. Experts estimate that amount would cover almost everyone in California (if you itemize). In the past, a significant portion of people, especially in Orange County, weren't able itemize all of their property taxes.

Private Mortgage Insurance deduction

The SALT deduction was effective for the 2025 tax year for all homeowners. A less publicized deduction for Private Mortgage Insurance or PMI will start this year in 2026. PMI is a monthly cost for buyers putting less than 20% down and previously it wasn't deductible. The PMI deduction would reduce costs for homebuyers with smaller down payments, which could only help the market.

Mortgage interest deduction limit made permanent

This year, Congress also made the mortgage interest deduction limit of $750,000 permanent. It was set to expire at the end of 2025, so making it permanent just means a little more predictability for homeowners and for new buyers.

Energy-related tax credits expire

Lastly, one seemingly negative tax change for this year is that you can no longer get a federal tax credit for energy-related items like solar panels or energy-efficient doors or windows. We say this is seemingly negative, because this could be a good thing for homeowners with existing solar panels. Their homes could be more valuable than their neighbors going forward since putting in solar now will be more costly.

Keep in mind, we're real estate pros not CPAs or tax attorneys, so talk with your tax pro before acting on anything we've discussed here. They might not be nearly as exciting as a real estate agent but they'll have the best tax advice for your particular circumstances.