Quick disclaimer first: this guide to homeowner tax benefits is for education only. I’m a REALTOR®, not a CPA or a tax advisor. Tax rules change, and everyone’s situation is different. Always confirm the details with a licensed tax professional before you file. If you don’t have one, I’m happy to refer you to a trusted South Bay accountant. Just reach out.

Owning a home is one of the biggest financial moves you will ever make. It is also where a lot of quiet value shows up each year, because the homeowner tax benefits can be real money. A few of them changed in a big way after the tax law that passed in 2025, so I have updated this guide for the 2026 tax year. If you own a home in San Pedro, the South Bay, or Long Beach, a couple of these deserve a real conversation with your accountant.

1. The Mortgage Interest Deduction

This is the classic one. If you itemize, you can generally write off the interest you pay on your home loan. In the early years of a mortgage, almost all of your payment is interest, so this adds up fast.

Here is what just changed. The limit was going to expire at the end of 2025. Instead, the 2025 tax law made it permanent. For loans taken out after December 15, 2017, you can deduct interest on up to $750,000 of mortgage debt ($375,000 if you are married filing separately). Bought before that date? You keep the older $1 million limit.

A few things people miss. This can cover a second home, not just your main residence. Interest on a home equity loan or HELOC only counts if you used the money to buy, build, or improve the home itself. And you only benefit if your itemized deductions beat the standard deduction, which is where the next item matters.

2. PMI Is Deductible Again in 2026

This one is brand new and easy to miss. If you put less than 20% down, you probably pay private mortgage insurance (PMI) every month. That write-off had disappeared. Starting with the 2026 tax year, PMI on your home loan counts as mortgage interest again, so you can deduct it if you itemize.

For a lot of first-time and recent buyers, that is a few hundred to a couple thousand dollars a year you could not deduct last year. Flag it for your accountant.

3. Property Taxes and the New $40,000 SALT Cap

This is the biggest homeowner tax benefit to change for Californians, and it is a good one. When you pay property taxes, you can deduct them if you itemize. That deduction sits inside one combined limit with your state and local income taxes, known as the SALT cap.

For years that cap was stuck at just $10,000. In a place like the South Bay, that barely covered the property tax bill. The 2025 law raised it to $40,000 (about $40,400 for 2026, and it rises roughly 1% a year through 2029). Earn above about $500,000 and the cap phases back down toward $10,000. For most homeowners, though, this is a major jump.

Here is why it matters locally. That move from $10,000 to $40,000 can finally push you past the standard deduction and make itemizing worth it again. If you took the standard deduction the last few years because the old cap made itemizing pointless, run the numbers again this year.

Two California notes while we are here. Thanks to Prop 13, your assessed value is based mostly on what you paid, and it can only rise about 2% a year, so your tax bill stays predictable. And if you own and live in the home, claim the California Homeowners’ Exemption. It takes $7,000 off your assessed value. The saving is small, but it is yours once you file, and plenty of owners never bother.

4. The Capital Gains Exclusion When You Sell

Sell your main home for more than you paid, and that profit is a capital gain. The tax code gives homeowners a big break here, and it did not change. Live in the home for at least two of the last five years, and you can exclude up to $250,000 of gain if you are single, or $500,000 if you are married filing jointly. The IRS lays out the rules here.

In a market like the South Bay, a home you bought a decade ago may have jumped in value, so this exclusion can save you tens of thousands. One tip that pays off later: keep receipts for every major improvement, like a remodel, a new roof, or an addition. Those costs raise your basis in the home and shrink your taxable gain. If it is an investment property instead, look at a 1031 exchange to defer the tax.

5. Deductions on Rental and Investment Property

Own a rental? Now you are running a small business, and the tax picture opens up. You can usually deduct mortgage interest, property taxes, insurance, repairs, management fees, and travel tied to the property.

The one that surprises people is depreciation. Each year you can deduct part of the building’s value, even while the property gains value (residential rentals write off over 27.5 years). There is also a nice rule for your own home. Rent it out for 14 days or fewer in a year, and that income is completely tax-free. Handy if you ever rent your place for a big local event.

6. The Home Office Deduction

Run your own business and use part of your home only for work? You may be able to deduct a slice of your home expenses. The simplified method gives you $5 per square foot, up to 300 square feet, for a $1,500 cap. The regular method deducts the actual share of your home you use for business.

Two cautions. First, a W-2 employee generally cannot take this deduction, even when working from home full time. It is for the self-employed. Second, “regularly and exclusively” matters, so the spare room that doubles as a guest room usually will not qualify. Get this one right with your accountant.

7. Energy Upgrades: An Important 2026 Change

Here is a change you need to know, because the old advice is now wrong. For a few years, the government offered a credit for energy-efficient upgrades, plus a separate credit worth 30% of the cost of solar. Both federal credits ended on December 31, 2025.

What does that mean? If you made qualifying upgrades during 2025, you can still claim the credit on your 2025 return, so do not leave that money behind. But upgrades made in 2026 and later no longer earn those federal credits. Before you spend money expecting a write-off, check the current rules. It is still worth asking your contractor and utility about California rebates and local incentives, which are separate from the federal program.

The Bottom Line on These Homeowner Tax Benefits

The headline is simple. With the SALT cap up to $40,000 and PMI deductible again, more homeowners in our area will come out ahead by itemizing than in recent years. At the same time, some green-energy moves that paid off in 2025 no longer carry a federal credit. The right answer depends on your numbers, so this is a great year to sit down with a tax pro instead of repeating what you did last April.

Want an introduction to a trusted local accountant, or thinking about a move and how these rules would play in? Reach out anytime. I am always glad to help you make the most of your homeowner tax benefits and your next step.

James Daniel III
REALTOR® · eXp Realty of Greater Los Angeles
San Pedro, the South Bay & Long Beach
(909) 289-2693 · James.Daniel@exprealty.com

This article is general education, not tax, legal, or financial advice. Please consult a qualified tax professional about your situation before making decisions.