TL;DR
- ✅ If your itemized deductions exceed the standard deduction, update Step 4b on your W-4
- ✅ Standard deduction in 2026: $15,000 single / $30,000 married filing jointly
- ✅ SALT cap raised to $40,000 under OBBBA 2026 — big win for CA, NY, NJ homeowners
- ✅ Step 4b reduces withholding by the amount above the standard deduction
Does buying a home actually change your taxes?
It depends on whether you'll itemize deductionsinstead of taking the standard deduction. With the 2026 standard deduction at $15,000 for single filers and $30,000 for married filing jointly, many homeowners — particularly those with smaller mortgages or in low-tax states — still don't clear the bar to itemize.
But if you have a large mortgage, high property taxes, or live in a high-tax state, you might. And if you do, updating your W-4 lets you capture that tax savings nowrather than waiting for your April refund.
What homeowners can deduct in 2026
Mortgage interest
Biggest deductionInterest on loans up to $750,000 is fully deductible. For a $400,000 mortgage at 7%, that's roughly $27,000 in interest in the first year alone — well above the standard deduction for single filers.
State and local taxes (SALT)
Cap raised to $40K in 2026Property taxes, plus either state income tax or sales tax. Under OBBBA 2026, the SALT cap was raised from $10,000 to $40,000 — a major change that makes itemizing more valuable for residents of high-tax states.
Mortgage points
First year onlyPoints paid to get a lower interest rate are deductible. In the year of purchase you can typically deduct them in full.
How to check if itemizing beats the standard deduction
Add up your likely itemized deductions for the year:
- Annual mortgage interest (from your lender's amortization schedule)
- Property taxes
- State income tax (or sales tax)
- Charitable donations (if you give regularly)
If that total exceeds $15,000 (single) or $30,000 (married), you should itemize — and you can update your W-4 to reflect it.
📊 Example: Single filer in California, $500K mortgage
Mortgage interest (year 1): ~$33,000
CA state income tax: ~$12,000
Property taxes: ~$6,000
Total itemized: $51,000
Standard deduction: $15,000
Excess to enter in Step 4b: $36,000
How to update Step 4b on your W-4
Step 4b on the W-4 asks for the amount by which your itemized deductions exceedthe standard deduction. You don't enter your total deductions — just the excess.
Estimate your total annual itemized deductions (mortgage interest + SALT + charity)
Subtract your standard deduction: $15,000 (single) or $30,000 (married filing jointly)
If the result is positive, enter it in Step 4b on your W-4
This tells your employer to reduce withholding by the tax savings on that additional deduction
Update each year as your mortgage interest decreases (it drops each year as you build equity)
Calculate your W-4 as a new homeowner — free
Enter your itemized deductions in Step 4b to see how much less you can withhold each paycheck.
Open the W-4 Calculator →High-tax state homeowners: the SALT cap change matters
If you live in California, New York, New Jersey, or another high-tax state, the OBBBA 2026 SALT cap increase from $10,000 to $40,000 is significant. Previously, even with a large mortgage and high property taxes, many high-earners in these states were capped at $10,000 for state and local taxes — limiting the benefit of itemizing.
With the new $40,000 SALT cap, more of your state taxes are deductible, which may push your total itemized deductions meaningfully above the standard deduction. Check your state-specific numbers — this change could make a real difference.
🏡 Check your state W-4 too
Most states with income taxes have their own equivalent of Step 4b for state withholding. Visit the state W-4 calculators to see your combined federal + state withholding as a new homeowner.
Key terms in this article
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