The 2026 federal tax changes introduced under the One Big Beautiful Bill Act significantly affect California homeowners. From the increase in the SALT deduction cap to updates on mortgage interest and PMI deductions, these changes may influence how Silicon Valley homeowners approach itemizing deductions and long-term real estate planning.
Below is a summary of the most relevant changes:
SALT Deduction Cap Increased to $40,000
The State and Local Tax (SALT) deduction cap has increased from $10,000 to $40,000 for tax years 2025–2029.
The cap begins to phase down for households earning over $500,000, as detailed in this breakdown by TaxAct.
For California homeowners, this may increase the likelihood that itemizing deductions makes financial sense — and avoiding common filing mistakes becomes even more important.
PMI Deduction Reinstated
Private Mortgage Insurance (PMI) premiums are once again deductible as mortgage interest for taxpayers with an Adjusted Gross Income (AGI) below $100,000.
This change may benefit buyers who put down less than 20%, according to NewHomeSource.
Mortgage Interest Deduction Made Permanent
The ability to deduct interest on up to $750,000 of mortgage debt has been made permanent, eliminating the previously scheduled reversion to the $1 million limit, according to Realtor.com.
This brings stability and predictability to long-term planning.
HELOC Interest Rules Remain
Interest on Home Equity Lines of Credit (HELOCs) remains deductible only if the funds are used to buy, build, or substantially improve the home securing the loan, says Kiplinger.
Energy Credits Expired
Federal tax credits for solar panels, battery storage, and other residential energy improvements expired on December 31, 2025, notes Porte Brown.
Energy upgrades can still add value to a home — just without a federal tax incentive attached.
If you're evaluating improvements from an ROI perspective, here are some of the smartest upgrades I’ve seen boost resale value.
Strategic Resources for Your Filing
If you are preparing to file your 2025 return in 2026, these resources provide deeper guidance:
• For a checklist of required paperwork, see Realtor.com’s guide to the documents homeowners need for filing.
• For a CPA’s technical perspective, review the Porte Brown analysis of the new tax law.
The Bottom Line
The math of homeownership shifted in 2026.
Higher SALT limits increase deduction potential for some households.
Mortgage interest rules are now permanent.
Energy credits are no longer part of the equation.
Tax structure directly influences buying, selling, and long-term real estate strategy — particularly in high-cost markets like Silicon Valley.
As always, consult your CPA regarding your personal situation. Real estate decisions are strongest when financial and tax planning align.
Frequently Asked Questions About 2026 Tax Changes
What is the new SALT deduction limit for 2026?
The SALT deduction cap increased to $40,000 for tax years 2025–2029, with phaseouts beginning at $500,000 of income.
Is mortgage interest still deductible in 2026?
Yes. The $750,000 mortgage debt limit has been made permanent under the new law.
Is PMI deductible in 2026?
Yes, PMI premiums may be deductible for taxpayers with AGI under $100,000, subject to phaseouts.
Did federal energy tax credits expire?
Yes. Federal residential energy credits expired December 31, 2025.
If you're considering a move in 2026, it's worth thinking through the broader financial picture before making a decision.
You can also explore my Home Buyer Resources and Home Seller Resources for practical next steps. And if you have questions about how these updates intersect with your real estate plans, I’m here as a resource.
