Tax Benefits of Owning a Home in Virginia (2027 Guide)

Owning a home in Virginia still cuts your taxes, but for most Hampton Roads buyers the savings are smaller than the headline numbers suggest. The federal benefits that matter for 2027 planning are the mortgage interest deduction on up to $750,000 of home debt, the property tax deduction inside a state and local tax (SALT) cap that rose to $40,400 for tax year 2026, the return of the mortgage insurance deduction starting with tax year 2026, and the $250,000 / $500,000 exclusion on gain when you sell. The deductions only help if your itemized total beats the standard deduction, which is $32,200 for married couples filing jointly in 2026 (IRS Rev. Proc. 2025-32). On your Virginia return, real estate tax is deductible in full with no SALT cap, and veterans rated 100% permanent and total disabled pay no real estate tax on their home.

This guide is general information, not tax advice. Talk to a tax professional about your own return before you count on any of these savings.

Benefit	Cap / Limit	Who Qualifies	Form
Mortgage Interest Deduction	Interest on up to $750k acquisition debt ($1M for loans taken out before Dec. 16, 2017)	Itemizers (Schedule A)	Form 1098
Mortgage Insurance Premiums	Treated as interest from tax year 2026; phases out at AGI $100k–$109k	Itemizers with PMI, FHA MIP, VA funding fee or USDA fee	Form 1098, box 5
Property Tax / SALT Deduction	$40,400 combined for 2026; reduced above $505k MAGI, never below $10k	Itemizers (Schedule A)	Schedule A
Mortgage Credit Certificate (MCC)	Credit rate on the certificate; $2,000/yr cap if rate is over 20%	Existing Virginia Housing MCC holders only (no new MCCs since April 28, 2023)	IRS Form 8396
Capital Gains Exclusion	$250k single / $500k married	Owned and lived in home 2 of last 5 years	Form 8949 / Schedule D
Disabled Veteran Exemption	Full real estate tax exemption on the home and up to 1 acre	Veterans rated 100% service-connected, permanent and total / qualifying surviving spouses	Apply via city/county commissioner of the revenue

Federal standard deduction for tax year 2026: $16,100 single, $24,150 head of household, $32,200 married filing jointly (IRS Rev. Proc. 2025-32, Oct. 9, 2025). The IRS had not published 2027 amounts as of Oct. 29, 2026. Itemizing only beats the standard deduction for higher-mortgage households.

Mortgage Interest Deduction

If you itemize on Schedule A, you can deduct interest on up to $750,000 of acquisition debt ($375,000 if married filing separately), meaning money used to buy, build or substantially improve your main or second home. Loans taken out before December 16, 2017 keep the older $1,000,000 limit. The 2025 federal tax law (Public Law 119-21) kept the $750,000 limit in place with no end date, so it carries into 2027. Interest on a home equity loan or HELOC is deductible only to the extent the money went into buying, building or substantially improving the home.

Your lender reports the interest on Form 1098 each January. Points paid to buy your main home, including points the seller paid for you, are generally deductible in the year of purchase if they meet the IRS tests in Publication 936. Your share of the year's real estate tax at settlement is deductible too: the IRS treats the buyer as paying the tax from the date of sale forward, and the split is shown on your settlement statement.

Mortgage Insurance Premiums (PMI, FHA, VA Funding Fee)

The mortgage insurance deduction expired after 2021 and was not available for 2022 through 2025. The 2025 federal tax law brings it back starting with tax year 2026: premiums for qualified mortgage insurance on your acquisition debt are treated as deductible mortgage interest. That covers private mortgage insurance on conventional loans and mortgage insurance provided by FHA, the Department of Veterans Affairs and the Rural Housing Service, which is how a VA funding fee can count.

• The deduction shrinks by 10% for each $1,000 of adjusted gross income above $100,000 ($500 above $50,000 if married filing separately), so it is gone at $109,000 of AGI.
• Lenders report premiums of $600 or more in box 5 of Form 1098.
• Prepaid premiums are generally spread over the life of the loan. Amounts paid to the VA or the Rural Housing Service are an exception under the Form 1098 rules, so ask your tax preparer how a VA funding fee paid or financed at a 2026 or 2027 closing should be handled.

Like mortgage interest, this only helps if you itemize.

Property Tax (SALT) Deduction

On your federal return, state and local taxes are deductible together under one cap if you itemize: real estate tax, Virginia income tax (or sales tax instead), and value-based personal property tax such as Virginia's car tax. The 2025 federal tax law raised that cap from $10,000 to $40,000 for 2025 and $40,400 for 2026, with 1% increases each year through 2029 and a return to $10,000 in 2030. The cap is reduced by 30% of modified AGI above $505,000 for 2026, but never below $10,000.

For most Hampton Roads owners the cap no longer bites. Real estate tax is charged on the city's assessed value, not your purchase price. At Virginia Beach's FY 2026-27 rate of $0.97 per $100, a home assessed at $442,500 owes about $4,292 a year. Add $5,000 of Virginia income tax and a car tax bill, and the total is still far below $40,400. Rates for every Hampton Roads city, with links to each assessor and treasurer, are on our Hampton Roads property search and tax records page.

The deduction counts only real estate tax actually paid during the year. If your lender pays from escrow, deduct what the lender paid to the city, not what you deposited.

Itemizing on Your Virginia Return

Virginia starts from your federal choice: if you take the federal standard deduction, you must take the Virginia standard deduction too. If you itemize federally, you itemize in Virginia, with three differences that matter to homeowners:

• No SALT cap on property tax. On Virginia Schedule A you deduct the full amount of real estate and personal property tax you paid. Virginia Tax confirmed in Tax Bulletin 26-1 (Feb. 20, 2026) that it generally does not apply a SALT cap to Virginia itemized deductions.
• No deduction for Virginia income tax. State and local income tax you deducted federally is subtracted back out on the Virginia return.
• High-income limit. Virginia still applies the older overall limit on itemized deductions (the "Pease" limitation). For 2025 returns it starts at $399,200 of Virginia AGI for joint filers and $332,700 for single filers.

The Virginia standard deduction is $8,750 single / $17,500 married filing jointly for 2026. The 2026 Appropriation Act raises it to $9,200 / $18,400 for 2027 and $9,300 / $18,600 for 2028 and 2029. On a loan like the one in the example below, first-year interest alone exceeds those amounts, so itemizers usually save something extra on the Virginia return at the 5.75% top rate.

Saving for a purchase? Virginia's first-time home buyer savings account lets you subtract the interest and other earnings on a designated account from Virginia taxable income, as long as the money goes to the down payment and allowable closing costs on a single-family home in Virginia. Withdrawals for other purposes trigger recapture of past subtractions.

Does Itemizing Pay? A Virginia Beach Example

Take the September 2026 Virginia Beach median sale price of $442,500 (VaHome analysis of REIN MLS data, September 2026; see the Virginia Beach market report). With 10% down and a 30-year fixed rate of 7.24% (Freddie Mac weekly average, Oct. 29, 2026), first-year interest on the $398,250 loan is about $28,700. Add about $4,292 of real estate tax and an assumed $5,000 of Virginia income tax and the federal itemized total is roughly $38,000.

• Married filing jointly: $38,000 minus the $32,200 standard deduction leaves about $5,800 of extra deductions. In the 22% bracket that is roughly $1,300 of federal savings.
• Single filer: $38,000 minus $16,100 leaves about $21,900, worth roughly $4,800 at 22%.
• Virginia return (married): interest plus real estate tax is about $33,000 against the $17,500 Virginia standard deduction, worth roughly $900 at 5.75%.

The benefit drops each year as more of your payment goes to principal, and a buyer with a smaller loan or a lower rate may find the standard deduction wins outright. Run your own numbers with a tax professional, and compare loan options with a Hampton Roads mortgage lender before you build a tax break into your budget.

Mortgage Credit Certificate (MCC)

A Mortgage Credit Certificate turns a percentage of the mortgage interest you pay each year into a federal tax credit, claimed on IRS Form 8396. Virginia Housing suspended its MCC program after April 28, 2023 and is not issuing new certificates, so buyers closing in 2027 should not plan on one. If you already hold a Virginia Housing MCC, it stays valid as long as you live in the home and the home is not sold and the loan is not paid off or refinanced. Your credit rate is printed on the certificate. If that rate is above 20%, the credit is capped at $2,000 a year, and if you itemize you must reduce your mortgage interest deduction by the credit you claim.

First-time buyers can still look at Virginia Housing loans, down payment assistance and closing cost help. See our guide to Virginia down payment assistance programs.

Capital Gains Exclusion on Sale

When you sell a main home that you owned and lived in for at least 2 of the 5 years before the sale, you can exclude up to:

• $250,000 of capital gain for single filers
• $500,000 of capital gain for married filing jointly (each spouse must meet the 2-year use test)

You can use the exclusion once every 2 years. Members of the uniformed services and Foreign Service on qualified official extended duty can elect to suspend the 5-year window for up to 10 years, which helps owners who PCS away and sell later. If you sell early because of a job move at least 50 miles farther away, you may still qualify for a partial exclusion.

Capital improvements (kitchen, bath, roof, additions) add to your cost basis and reduce taxable gain, so keep receipts. Depreciation claimed for a home office or rental use cannot be excluded and is taxed when you sell. Curious what your gain might look like? Start with a free home value estimate.

Home Office Deduction

Only self-employed filers and other business owners can claim it. W-2 employees who work from home cannot deduct a home office under current federal law. The space must be used regularly and exclusively for the business. Two methods: simplified ($5 per square foot, up to 300 square feet, for a maximum of $1,500) or actual expenses (the business share of utilities, insurance, repairs, depreciation, mortgage interest and real estate tax). Depreciation taken under the actual-expense method is taxed when you sell, as noted above.

Energy credits are another change to know: the federal residential clean energy credit (solar and similar) and the energy efficient home improvement credit ended for expenditures and property placed in service after December 31, 2025, so they are not available for 2027 projects.

Virginia disabled veteran exemption and local tax relief

Under Va. Code § 58.1-3219.5, a veteran rated by the VA as having a 100 percent service-connected, permanent and total disability pays no real estate tax on the home he or she occupies as a principal residence, plus up to one acre of land (more if the locality exempts more acreage under its other relief programs). Key rules:

• Apply with the commissioner of the revenue in the city or county where the home sits, with an affidavit and VA documentation of the rating. You can apply before you buy by including the purchase agreement.
• You refile only if your principal residence changes, so a move within Hampton Roads means a new filing with the new locality.
• A surviving spouse keeps the exemption if the veteran died on or after January 1, 2011 and the spouse does not remarry, even after moving to a different principal residence.
• Surviving spouses of service members who died in the line of duty (with a Department of Defense Line of Duty determination) have a separate exemption under Va. Code § 58.1-3219.9. It fully covers homes assessed at or below the locality's average single-family value; above that, only the excess is taxed.

For VA loan rules, PCS timing and base drive times, see our military relocation page. Tom & Dariya Milan, Realtors, are both Military Relocation Professionals (MRP).

Virginia also lets cities and counties offer real estate tax exemptions or deferrals for owners who are 65 or older or permanently and totally disabled (Va. Code § 58.1-3210). Each locality that offers relief sets its own income and net worth limits, and they change from year to year. In Virginia Beach, the Commissioner of the Revenue's senior and disabled tax relief page lists the current requirements.

One new buyer protection starts January 1, 2027: Virginia's residential property disclosure statement must warn that land taxed under a special land-use assessment can owe roll-back taxes and interest if its use or zoning changes, and a settlement agent who knows the property is in a land-use program must give the buyer written notice before settlement and get a signed acknowledgment.

Frequently Asked Questions

Are mortgage payments tax deductible in Virginia?

The interest portion is deductible (on up to $750,000 of acquisition debt) if you itemize, and from tax year 2026 mortgage insurance premiums can be too, subject to the income phase-out. Principal payments and homeowners insurance are not deductible.

How much is the mortgage interest deduction worth?

Only the amount by which all your itemized deductions exceed the standard deduction saves you money. In the Virginia Beach example above, a married couple in the 22% bracket saves roughly $1,300 federally in year one, while a single filer saves roughly $4,800.

Should I itemize or take the standard deduction?

Itemize only if mortgage interest, mortgage insurance, property tax, state income tax and charitable gifts together exceed the standard deduction ($16,100 single / $32,200 married filing jointly for 2026). Your Virginia return follows the same choice.

What are the 2027 standard deduction amounts?

Virginia's are set: $9,200 single and $18,400 married filing jointly for 2027. The IRS had not released the 2027 federal amounts as of October 29, 2026; until it does, plan with the 2026 figures.

Can I still get a Mortgage Credit Certificate (MCC) in Virginia?

Not from Virginia Housing. It suspended the program after April 28, 2023 and issues no new MCCs. Homeowners who already have one can keep claiming the credit on Form 8396.

Do I pay tax when I sell my home?

Up to $250,000 single / $500,000 married of capital gain on a main home is excluded from federal tax if you owned and lived in it 2 of the last 5 years. Gain above that is taxed as a capital gain on your federal return and flows into your Virginia income as well.

Are property taxes deductible in Virginia?

Yes, if you itemize. Federally they share the SALT cap ($40,400 for 2026) with state income tax. On the Virginia return, real estate and personal property tax are deductible in full with no SALT cap.

Is the disabled veteran property tax exemption automatic?

No. You must apply through your city or county commissioner of the revenue with documentation of a 100% service-connected, permanent and total disability rating from the VA. You only refile if you change your principal residence.

Can I deduct home repairs?

Generally no for a personal residence. Capital improvements add to your cost basis, which reduces taxable gain when you sell.

Sources & further reading

• IRS — Publication 936: Home Mortgage Interest Deduction
• IRS — Publication 530: Tax Information for Homeowners
• IRS — Publication 523: Selling Your Home
• IRS — Publication 587: Business Use of Your Home
• IRS — Form 8396: Mortgage Interest Credit
• IRS — Rev. Proc. 2025-32: Tax Year 2026 Inflation Adjustments
• IRS — Instructions for Form 1098 (Rev. December 2026)
• 26 U.S.C. § 164: State and Local Tax Deduction Limits
• Virginia Tax — 2025 Schedule A Instructions
• Virginia Tax — Tax Bulletin 26-1 (Feb. 20, 2026)
• Virginia Tax — 2026 Legislative Summary
• Virginia Housing — MCC Overview for Tax Preparers
• Va. Code § 58.1-3219.5: Disabled Veterans Real Property Tax Exemption
• Va. Code § 58.1-3219.9: Surviving Spouses of Armed Forces Members Killed in the Line of Duty
• VA Department of Veterans Services — Real Estate Tax Exemption
• Freddie Mac — Primary Mortgage Market Survey

Information reflects federal and Virginia rules as of October 29, 2026, using tax year 2026 federal figures and enacted Virginia figures for 2027. This is general information, not tax advice; confirm details with a tax professional, the IRS, Virginia Tax or your city before relying on any figure.