Is Buying a House a Tax Write-Off in Maryland? Every Tax Deduction Homeowners Can Claim in 2026

The single most-asked tax question I get from first-time Maryland buyers is some version of: "Will I get a big tax break for buying a house?" The honest answer is: it depends, and for many buyers the tax benefits are smaller than they expected after the 2017 Tax Cuts and Jobs Act (TCJA).

Here's exactly what's deductible for Maryland homeowners in 2026, what isn't, and how to figure out whether you'll actually benefit.

Important disclaimer: I'm a REALTOR®, not a CPA. The information below is general guidance, not personal tax advice. Always confirm with your CPA before making decisions that depend on tax math.

What home-related expenses are tax-deductible in 2026?

For Maryland homeowners who itemize their federal return, the following are deductible:

1. Mortgage interest on up to $750,000 of acquisition debt for primary + secondary residence combined ($375,000 if married filing separately)
2. State and local taxes (SALT) including property tax, up to $10,000 combined cap ($5,000 if married filing separately)
3. Mortgage insurance premiums (subject to income limits, status varies year-to-year — confirm with CPA)
4. Discount points paid at closing (on a purchase — for refinance, deducted over loan life)
5. Home office deduction if you have a dedicated work-from-home space and qualify under self-employment rules

These deductions are only valuable if your total itemized deductions exceed the standard deduction. For 2026, the standard deduction is estimated at:

• Single: ~$15,000
• Married filing jointly: ~$30,000
• Head of household: ~$22,500

If your itemized total is less than the standard deduction, the mortgage-related deductions don't help you.

Is mortgage interest tax-deductible in Maryland?

Yes — with limits.

For mortgages taken out after December 15, 2017 (most current MoCo buyers), interest is deductible on up to $750,000 of acquisition debt ($375,000 if married filing separately). For older mortgages, the limit is $1 million.

"Acquisition debt" = debt used to buy, build, or substantially improve your primary or secondary residence. A cash-out refinance used to pay off credit cards is not acquisition debt for tax purposes.

Worked example: $620,000 mortgage at 6.75% interest, year 1.

• Total interest paid year 1: ~$41,800
• All deductible (under $750K limit)
• Federal tax savings at 22% bracket: $41,800 × 0.22 = $9,196
• Maryland tax savings at ~5.75% rate + ~3.2% MoCo = $41,800 × 0.0895 = $3,741
• Total tax savings: ~$12,937

That's meaningful — but it only counts if you itemize.

For most MoCo households with substantial mortgages, mortgage interest plus property tax plus charitable contributions usually exceeds the standard deduction. For households with smaller mortgages or no mortgage, the standard deduction often wins.

Is property tax tax-deductible in Maryland?

Yes — capped at $10,000 combined with state income tax.

The 2017 TCJA created the SALT (State and Local Taxes) deduction cap of $10,000. This includes:

• State income tax
• Local income tax (Montgomery County's 3.2%)
• Property tax

Maryland is a high-tax state. A married couple earning $200,000 in Montgomery County pays roughly:

• Maryland state income tax: ~$10,000+
• MoCo county income tax: ~$6,400
• Property tax on a $700K home: ~$7,000

That's $23,000+ in state/local taxes — but only $10,000 is deductible federally. The remaining $13,000+ is effectively non-deductible.

For Maryland property owners, the SALT cap is the single biggest reason the 2017 tax reform was a net negative compared to the pre-2018 rules. Pre-TCJA, that full $23,000 would have been deductible.

Note: The SALT cap is scheduled to expire at the end of 2025 under current law, restoring full deductibility starting in tax year 2026 unless Congress extends or modifies. As of May 2026, monitor your CPA's guidance closely — this could be a major change for MoCo homeowners.

Are mortgage points tax-deductible in Maryland?

Yes, with conditions.

Discount points paid at closing on a purchase are deductible in the year you paid them if:

• The loan is for your primary residence
• The points were paid for a lower interest rate (not origination fees)
• The amount is reasonable for your market
• You itemize

For a refinance, points are deducted over the life of the loan (1/30th per year on a 30-year loan).

For more on whether points make sense in the first place, see are mortgage points worth it in Maryland.

Are mortgage insurance premiums tax-deductible?

Yes, in some years — but the rule keeps changing.

For 2018–2021, mortgage insurance premiums (PMI on conventional, MIP on FHA) were deductible for households with income under specific thresholds. For 2022 onward, this deduction has been expired and renewed multiple times by Congress.

As of May 2026, the status of mortgage insurance deductibility for tax year 2026 should be confirmed with your CPA. If it's allowed, the deduction phases out for household income above $109,000 (married filing jointly) and disappears entirely above $109,000–$129,000.

Can I deduct closing costs?

Most closing costs are NOT deductible — but some increase your cost basis.

Deductible at closing (if itemizing):

• Mortgage interest pre-paid at closing
• Property tax pre-paid at closing
• Discount points

Not deductible — but they increase your cost basis (reducing capital gain at future sale):

• Title insurance (owner's policy)
• Settlement fees
• Recording fees
• Survey costs
• Transfer/recordation tax (the buyer's portion)
• Attorney fees

This distinction matters when you eventually sell. A higher cost basis means lower capital gain, which means less tax owed on appreciation. For the full breakdown, see capital gains tax when selling your home in Maryland.

Is the down payment tax-deductible?

No. A down payment is not a tax-deductible expense. It's the equity you're buying in your home — a transfer of cash to an asset, not a deductible expense.

This is one of the most common misconceptions. Some buyers assume their entire down payment is "spent on the house" and therefore deductible. It isn't.

What's the Maryland HomeCredit / Mortgage Credit Certificate?

The Maryland HomeCredit Program (MHC), administered through the Maryland Department of Housing and Community Development (DHCD), allows eligible first-time homebuyers to claim a federal tax credit of up to 25% of their annual mortgage interest paid (capped at $2,000 per year).

Key features:

• Available only to first-time buyers (defined as not having owned a primary residence in the last 3 years) using an MMP loan
• Up to $2,000 tax credit per year (dollar-for-dollar reduction of federal tax)
• The credit is in addition to any mortgage interest deduction
• Must be paired with an MMP loan
• Has income limits and purchase price limits

For Maryland first-time buyers, this is one of the most underutilized tax benefits in the state. A $2,000/year tax credit over 30 years = $60,000 in tax savings.

See first-time home buyer programs in Maryland 2026 for the full breakdown of MMP eligibility and how to access the HomeCredit program.

Are home improvements tax-deductible?

Not in the year you do them — but they increase your basis for future capital gains purposes.

Capital improvements (kitchen remodel, new roof, new HVAC, addition) are added to your cost basis in the home. When you eventually sell, your taxable gain = adjusted sale price minus adjusted basis. The higher your basis, the lower your gain.

Maintenance and repairs (painting, fixing a leak, replacing a window) are not added to basis. They're just expenses.

Energy-efficient improvements may qualify for federal tax credits under the Inflation Reduction Act:

• Energy Efficient Home Improvement Credit: up to $3,200/year for insulation, windows, doors, HVAC, etc.
• Residential Clean Energy Credit: 30% of cost for solar panels, geothermal, wind, fuel cells, battery storage

These are credits (dollar-for-dollar tax reduction), not deductions. They're more valuable than deductions of the same amount.

For Maryland buyers considering improvements, confirm with your CPA which qualify — the federal credit rules are specific.

Can I deduct my home office?

Only if you're self-employed and meet specific criteria.

W-2 employees can no longer deduct unreimbursed home office expenses (the TCJA eliminated this for 2018–2025).

Self-employed (Schedule C) filers can deduct a home office if:

• The space is regularly and exclusively used for business
• It's your principal place of business
• You meet the IRS "convenience of the employer" test if applicable

Two calculation methods:

1. Simplified: $5 per square foot, up to 300 sq ft = $1,500 max
2. Actual expenses: percentage of home expenses based on square footage of office

For most MoCo W-2 employees working from home, the home office deduction is unavailable. For freelancers, contractors, and small business owners, it can be meaningful.

How does buying a house affect my Maryland state taxes?

Maryland conforms to most federal real estate deductions with some adjustments:

• Mortgage interest deduction: Maryland follows federal
• Property tax deduction: Maryland follows federal, subject to SALT cap
• Capital gain exclusion at sale: Maryland follows the Section 121 federal exclusion
• HomeCredit: federal credit only, but linked to Maryland MMP loan eligibility

Maryland tax savings stack on top of federal savings. If you save $9,000 federal from itemizing mortgage interest, you also save ~$800 Maryland tax (5.75% × $14,000 deduction × MD effective rate adjustment). Plus MoCo county tax (3.2%).

The combined federal + state + county tax benefit of homeownership for a $200K-income MoCo household can total $8,000–$15,000/year in the early loan years (when interest is highest).

Should I buy a house for the tax benefits alone?

No. This is one of the worst reasons to buy a house.

The math: to "save" $10,000 in tax, you typically need to spend $40,000–$50,000 in mortgage interest. You don't profit on the deduction — you reduce the tax owed on money you would otherwise have spent on rent.

If your rent is $2,500/month ($30,000/year), buying a home with $30,000/year of mortgage interest deducts about the same amount of taxable income that you would have lost to rent (where rent gives you zero deduction).

The tax break is a partial offset to your housing cost, not free money.

Better reasons to buy:

• You'll be in the home 5+ years
• You want to build equity (principal paydown + appreciation)
• You want price/payment stability vs. rent increases
• You value owner control (renovations, pets, aesthetics)
• You're in a Maryland market expected to appreciate

For the rent-vs-buy decision, see rent vs. buy in Montgomery County 2026.

What records should I keep for tax purposes?

The single most valuable thing you can do as a Maryland homeowner: maintain a basis file from day one.

Save digital copies of:

1. HUD-1 / Closing Disclosure from your purchase — establishes cost basis
2. Receipts for every capital improvement — kitchen, bath, roof, HVAC, etc.
3. Permits for any work
4. Mortgage Form 1098 (annual interest statement from your lender) — for deduction documentation
5. Property tax bills — for deduction documentation
6. Discount points statement if applicable
7. Mortgage insurance premiums statement
8. Home office expense receipts if applicable

When you eventually sell, the cost basis adjustments from improvements can save you $10,000–$50,000 in capital gains tax. But only if you can document them.

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The bottom line

Tax write-offs for Maryland homeowners in 2026:

• Mortgage interest on up to $750K of debt — deductible if itemizing
• Property tax + state income tax — deductible up to $10K combined (SALT cap may expire after 2025)
• Discount points paid at closing — deductible in year paid
• Mortgage insurance — deductible if Congress extends; subject to income limits
• Maryland HomeCredit — up to $2,000/year tax credit for first-time MMP buyers
• Energy improvements — federal credits under Inflation Reduction Act

The most common mistake first-time buyers make: assuming a massive tax break that turns out to be modest after the standard deduction wins, or after the SALT cap clips their deduction.

Plan with the assumption that homeownership saves you $0 in tax, and treat any actual savings as upside. If you end up saving $5K–$15K in tax annually, great — but don't structure your buying decision around it.

For the broader cost picture of buying in Maryland, see the real cost of buying a home in Maryland and who pays for what when buying a house in Maryland.

Questions about specific tax strategy for your purchase? I can refer you to a Maryland-specialized CPA — call (301) 357-1170 or email edwarddumi.realtor@gmail.com.