Most people think the tax break on a house is the mortgage interest deduction. It used to be a big one. Now nearly 90% of taxpayers take the standard deduction instead of itemizing, so for a lot of
Homeowner tax benefits: what matters more than the mortgage interest deduction
Dated: September 22 2026
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Most people think the tax break on a house is the mortgage interest deduction. It used to be a big one. Now nearly 90% of taxpayers take the standard deduction instead of itemizing, so for a lot of homeowners, deducting interest and property taxes does nothing.
That doesn't mean owning a home has lost its tax advantages. The two bigger ones show up when you sell and when the house passes to your heirs, and most people overlook both.
The capital gains exclusion
When you sell your primary residence, you can exclude up to $250,000 of gain if you're single, or $500,000 if you're married filing jointly. You generally need to have owned the home and lived in it as your primary residence for at least two of the last five years.
Say a couple bought a home for $300,000 and sold it years later for $750,000. The $450,000 gain is under the $500,000 limit, so they could owe no federal tax on it. Very few investments let you keep that kind of appreciation tax-free. Your actual number depends on selling costs and improvements, so it's worth running before you list.
The step-up in basis
When someone inherits a home, the tax basis generally resets to the fair market value on the date of death. Basis is what your gain gets measured against when you sell, so a higher basis means less taxable gain.
Say parents bought a home for $100,000 and it's worth $600,000 when they pass. Their children's basis becomes $600,000, not $100,000. If the kids sell near that value, they may owe little or no capital gains tax, even though the house gained $500,000 while the parents owned it. Without the step-up, they'd be taxed on decades of appreciation.
One thing to know before you plan around this: the step-up applies to property inherited at death. If a parent deeds the house to a child while still alive, the child generally takes the parent's original basis. That difference can cost real money, so talk to your CPA before anyone signs a deed.
What this means for you
Mortgage interest and property tax deductions still matter for some owners. But for most families, the bigger dollars are in the appreciation you keep when you sell and what you pass on. If you're thinking about selling, or planning what happens to a property down the road, run the numbers before you make a move. Give me a call and I'll pull yours, and your CPA can confirm the tax side.
Download our Homeowners Tax Guide.
Clinton Hanks
I grew up right here in Redwood Valley and I live just a few miles from the house I grew up in. That’s not a marketing point—it’s just context for what came next. My path included 5 years as a....
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