Owning a Home May Be Less Expensive Come 2026. Here's Why

There's a reason people are cautioned to make sure they're on solid financial ground before diving into homeownership. The cost of owning property extends far beyond just the expense of a monthly mortgage payment.

In addition to the money you have to send your mortgage lender every month, you're required to pay for homeowners insurance, maintenance, repairs, and property taxes. And in some states, the latter can be quite expensive.

Take New Jersey, for example. Known for its soaring property taxes, the median homeowner bill in that category was $8,797, as of 2022.

Now, the good news is that homeowners who itemize on their tax returns can take a deduction for property taxes. The bad news, though, is that homeowners in high-tax states may not be able to write off their property tax bills in full.

Your deduction is capped at $10,000

As a result of the Tax Cuts and Jobs Act, the state and local tax deduction (otherwise known as the SALT deduction) is now capped at $10,000 regardless of your state of residence. This means the maximum deduction you can take for property taxes and state income taxes combined is $10,000.

It's worth noting that the $10,000 limit applies to federal taxes. States can set their own limits for deducting property taxes, and in some states, the threshold is higher than $10,000.

But still, if you're someone with a $12,000 property tax bill, you automatically don't get to deduct $2,000 of that total on your federal tax return under the current rules. If you pay $8,000 a year in property taxes and $7,000 a year in state income taxes, you similarly lose out on a deduction to some degree due to the $10,000 SALT cap.

But that $10,000 cap may not last forever. And come 2026, owning a home in a high property tax state may be more affordable.

The rules might change

The Tax Cuts and Jobs Act limited the SALT deduction to $10,000. But that rule is currently set to expire in 2025 unless lawmakers determine otherwise. As such, come 2026, it's possible that as a homeowner, you may be able to take a larger tax deduction for your property taxes. And that could result in a world of financial relief.

Granted, this potential change may not impact you if you live in a state with no income tax and your current property tax bill is something like $3,500. But for residents of states with higher property taxes, this change could be huge.

You can also appeal your property taxes

At this point, it's too soon to know whether the $10,000 SALT cap is here to stay for the long haul. But you should also know that you're not necessarily stuck with the property tax bill you're assessed.

As a homeowner, you have the right to appeal your property taxes. The process for doing so differs from state to state, but your local tax assessor should be able to walk you through the process of filing an appeal where you live.

To win a property tax appeal, though, you have to prove that the value being assigned to your home by your local tax assessor is higher than the home's true market value. At a time when home prices are up on a national scale, that may be tough to do.

However, if the real estate market cools off in the coming months or years, fighting your property tax bill may be more doable. If your home is assessed at $500,000, and you can find proof that comparable homes in your neighborhood sold recently for $420,000, you have a case.

If the SALT cap limit expires in 2025 as it's currently scheduled to do, then you may find that you're eligible for a larger tax deduction in 2026. However, don't go into homeownership now banking on a larger tax write-off in 2026. Instead, crunch the numbers to make sure you can afford the full cost of homeownership -- regardless of whether the SALT deduction becomes more valuable in the future.