President’s Day: Tax Perks for Military Home Owners

Heidi Robbins

Aug 31

2 min read

Updated: 3 days ago

Presidents Day is a good time to look at the tax benefits built in for service members who own a home. Many families miss savings simply because they don't know the military-specific rules. As a military spouse for more than 30 years and an Arlington Associate Broker with 560+ transactions, I encourage every buyer to review these with a tax professional.

This article is general information, not tax, legal or financial advice.

Federal benefits

Mortgage interest: If you itemize, you can deduct interest on up to $750,000 of mortgage debt for a main or second home. Your BAH is tax-free, and paying the mortgage with it doesn't reduce the deduction.
Property taxes: Also deductible if you itemize, even when paid with BAH, within the state and local tax limit.
Mortgage insurance: Starting with 2026 returns, mortgage insurance premiums are deductible again for itemizers, under the One Big Beautiful Bill Act. Ask your tax professional whether you qualify.
Selling your home: You can exclude up to $250,000 of gain, or $500,000 for joint filers, if you owned and lived in the home for two of the last five years. Service members on qualified extended duty can suspend that five-year period for up to 10 years. Depreciation on a rental is still taxed. See my capital gains guide.

State benefits

States vary widely. Eight states have no income tax, and many others exempt some or all military retirement pay. Some states also offer property tax breaks for disabled veterans. Arizona, for example, passed HB 2792 in February 2026. Starting with the 2026 tax year, it fully exempts the main home of a veteran with a 100% service-connected disability rating from property tax.

Virginia benefits

Property taxes: Virginia exempts the main home of a veteran rated 100% service-connected, permanent and total from real estate taxes. Surviving spouses who haven't remarried can keep it.
Military retirement pay: Virginia lets retirees subtract up to $40,000 of military retirement pay from taxable income for 2025 and later.

My VA disability guide explains the property tax exemption.

Take a few minutes this month

Gather your Form 1098 and your county's tax bill. Then check with a tax professional or your installation's free tax center about which benefits apply to you.