If you're a homeowner, Trump's 2025 tax overhaul contains several key changes that could affect your bottom line, from property tax deductions to mortgage interest rules and the elimination of major tax credits.
For example, the newly enacted tax cuts and spending legislation, often dubbed the ‘big beautiful bill’ (BBB), temporarily raises the cap on the state and local tax (SALT) deduction, which can save some homeowners thousands of tax dollars each year.
The new tax law also locks in some tax breaks for homeowners, like making the current mortgage interest deduction cap permanent.
However, the legislation isn’t all sunshine and rainbows. That’s because Trump’s tax agenda eliminates certain tax credits for energy-efficient home improvements, which, for example, spurred some homeowners to rush to install solar panels.
Here are five important changes in Trump's tax plan that every homeowner should know.
1. Last chance to claim energy-efficient tax breaks
If you want to save on your electricity bill and are considering switching to solar, you’ll have to make changes as soon as this year to claim a tax break.
The Trump administration’s new tax package terminated several energy-related tax credits earlier than expected under prior law. As a result, some experts say families in some states could see energy costs increase by more than $600 a year.
Here are some energy-related tax breaks that ended prematurely under the BBB.
- Energy Efficient Home Improvement Tax Credit: For 2025 taxes, homeowners can still claim a tax credit of up to $3,200 for eligible energy-efficient upgrades, such as installing new insulation, windows, and HVAC systems completed in 2025 but before January 1, 2026.
Note: While the Biden-era Inflation Reduction Act (IRA) originally extended this credit until January 1, 2033, Trump's tax legislation moved the expiration date to December 31, 2025. So, the tax break is not available for 2026 taxes (returns typically filed in 2027).
- Residential Clean Energy Credit: For 2025 tax returns, homeowners can claim a 30% tax credit for installing eligible clean energy systems in 2025. This includes solar panels, small wind turbines, battery storage technology, or geothermal systems.
Note: The IRA originally extended the credit to Jan. 1, 2035, with the credit phased to 22% as of 2033. But under the new Trump tax bill, the credit expired after Dec. 31, 2025, so the tax break is not available for 2026 installations.
2. SALT cap quadruples to $40K
If you’re a homeowner in a high-tax state, there’s one major provision tucked within the ‘big beautiful bill’ that can put thousands of dollars back into your pocket.
The Trump administration’s 2025 tax bill allows taxpayers with incomes under $500,000 to deduct up to $40,000 in state and local taxes (SALT) when they file taxes in early 2026.
The temporary increase is effective for tax years 2025 through 2029 and will gradually rise by 1% each year. As reported by Kiplinger, the increased cap offers much-needed relief for middle-income homeowners in expensive cities.
Trump's Tax Cuts and Jobs Act of 2017 (TCJA) previously set the SALT cap at $10,000 ($5,000 for married individuals filing separately) from 2018 through 2025. Before 2018, there was no limit on the amount that could be deducted.
For more information, see SALT Deduction: 3 Things to Know Now.
3. Mortgage interest deduction is permanent
Homeowners who opt to itemize their deductions can deduct mortgage interest on up to $750,000 of debt ($375,000 if married filing separately). This applies to funds used to purchase, construct, or substantially improve a primary or secondary home.
Trump’s 2025 tax cuts and spending legislation make the mortgage interest deduction cap permanent. This deduction was set up to expire after 2025 under the TCJA, and revert to the previous $1 million cap.
What’s more, Trump’s tax bill made other changes as to what is eligible as mortgage interest during the 2026 tax year.
- Private Mortgage Insurance (PMI): Your mortgage insurance premium will be treated as mortgage interest, allowing a deduction for borrowers who paid less than a 20% down payment. The deduction phases out for single and married couples filing jointly with an adjusted gross income (AGI) of $100,000.
- Home Equity Lines of Credit (HELOC): Interest paid on HELOCs will be deductible if funds are used to buy, build, or substantially improve a home. Interest paid on a HELOC used for other purposes will not be deductible.
4. Builders get expanded affordable housing tax credits
The "big beautiful bill" expands the Low-Income Housing Tax Credit (LIHTC), a 10-year tax break for private developers and investors building or renovating affordable rental housing for low- and moderate-income tenants.
If you’re currently a renter in search of affordable housing, this update could make more affordable units available over the next couple of years.
- Starting in 2026, the BBB permanently increases states’ annual housing credit allocations from 9% to 12%. This should help states finance more affordable housing rental projects each year.
- The 2025 tax bill also permanently lowers the bond financing threshold from 50% to 25% for deals using tax-exempt bonds. This aims to encourage developers to finance more projects.
5. What Trump tariffs mean for housing costs and homeowners
To round out our list, homeowners and prospective buyers should closely monitor the Trump administration's tariff policy.
As reported by Kiplinger, President Donald Trump argues that tariffs on imported goods reduce the U.S. trade deficit and improve manufacturing. By contrast, economists warn that these taxes will be passed down to U.S. consumers, which may stall economic growth.
Last year, Home Depot announced that some of its prices were increasing due to tariffs in its latest earnings call. The major retailer said that a little less than half of its inventory is imported.
Those and similar price changes could impact homeowners looking to improve or remodel, or furnish their homes.
Lowe's, another major home improvement retailer, previously stated it would try to maintain prices but has not dismissed possible future price increases influenced by tariffs.
Roughly 60% of goods sourced from Lowe’s are reportedly from the U.S.
Tariffs are also expected to impact potential homebuyers.
- For instance, Trump implemented tariffs on steel and aluminum, and Canadian softwood lumber could face higher import taxes.
- These are raw materials used in home construction, which have caused homebuilders to worry about supply-chain disruptions and their ability to deliver new projects.
“Tariffs on building materials and home appliances raise the cost of housing, and consumers end up paying for the tariffs in the form of higher home prices and goods,” the National Association of Home Builders (NAHB) said in a statement.
