Tax Tips for Military Homeowners

Owning a home changes your taxes, and military life adds a few rules most civilian homeowners never see. As a military spouse for more than 30 years and an Arlington Associate Broker with 560+ transactions, I've watched families leave money on the table because nobody explained these rules before a PCS. Here is what to know, with links to the IRS pages that spell it out.

This article is general information, not tax, legal or financial advice. Your situation may differ, so check with a tax professional or MilTax before you file.

The 2025 tax law changed several homeowner rules

The 2025 tax law (Public Law 119-21) made several changes that matter to homeowners:

• Standard deduction: for 2026 it's $16,100 for single filers, $32,200 for married couples filing jointly and $24,150 for heads of household. Itemizing only helps if your deductions beat these amounts.

• State and local taxes (SALT): the limit on deducting state income, sales and property taxes rose from $10,000 to $40,000 in 2025 and is $40,400 for 2026 ($20,200 if married filing separately). It's reduced if your modified adjusted gross income is over $505,000, but not below $10,000.

• Mortgage interest: the rules that limit the deduction to interest on up to $750,000 of acquisition debt (for loans taken out after December 15, 2017) are now permanent.

• Mortgage insurance: starting with 2026, the new law treats mortgage insurance premiums as deductible mortgage interest again. The deduction had expired after 2021. VA loans don't have monthly mortgage insurance, but this matters if you have an FHA or conventional loan.

• Energy credits: the home energy credits ended for property placed in service after December 31, 2025. My 2026 energy upgrades post explains what that means.

Deductions homeowners can claim

If you itemize, the main homeowner deductions are:

• Mortgage interest, shown on the Form 1098 from your lender.

• Real estate taxes you paid, within the SALT limit.

• Points paid to get your mortgage, in many cases.

If you received a Mortgage Credit Certificate from a state or local housing agency, that's a credit, not a deduction. You claim it on Form 8396.

The military home-sale rule

When you sell your main home, you can usually exclude up to $250,000 of gain ($500,000 if married filing jointly), as long as you owned and lived in the home for at least 2 of the 5 years before the sale.

PCS orders often make that hard. The tax code lets you suspend the 5-year period while you or your spouse are on qualified official extended duty. That means duty of more than 90 days (or indefinite) at a station at least 50 miles from the home, or while living in government quarters under orders. The suspension can last up to 10 years. You can apply it to only one property at a time.

If you don't meet the full test, a PCS can still qualify you for a reduced exclusion. IRS Publication 523 walks through both rules. My post on capital gains rules for military families has examples. If you've rented the home out, depreciation you claimed (or could have claimed) is taxed when you sell, even if the gain is excluded.

PCS moving expenses

Active-duty members moving under PCS orders can deduct reasonable unreimbursed moving costs for themselves and their household. That includes moving household goods and travel, but not meals. You can't deduct anything the government paid for or reimbursed. Use Form 3903. If you did a PPM, keep every receipt, since the incentive payment is taxable. My PPM guide covers the paperwork.

Records to keep all year

• Closing Disclosures for every purchase, sale and refinance

• Form 1098 from your lender, and property tax bills

• Receipts for improvements, which raise your cost basis and lower taxable gain when you sell

• PCS orders and moving receipts

• Rental income and expense records if you rent out a former home

A folder (paper or digital) that you update as the year goes is far easier than a scramble in March.

Free help

MilTax from Military OneSource gives active-duty members, eligible family members, survivors and recent veterans free tax software and free one-on-one help from consultants who know PCS moves, combat pay and the Military Spouses Residency Relief Act. Many installations also run free tax centers in filing season.

In Northern Virginia

Arlington, Fairfax, Prince William and Loudoun counties each set their own real estate tax rate every spring, and your bill is based on the county's assessed value. Virginia also exempts the main home of veterans with a 100% permanent and total service-connected disability rating from real estate tax. My post on VA disability and state property tax exemptions explains how to apply, and my Presidents' Day tax perks post covers other savings. If you're planning a PCS to the area, my Northern Virginia PCS guide is a good place to start.

Sources: IRS Publication 523; IRS Publication 3; IRS Schedule A instructions; IRS, 2026 inflation adjustments; IRS Publication 530; IRS, One Big Beautiful Bill provisions; Thomson Reuters.

Last reviewed: October 2026