Honoring Service Through Financial Benefits
President’s Day is a time to reflect on the leadership that has shaped our nation. For those currently serving and our veteran community, it is also a great time to review the unique financial “thank yous” built into the American tax code. As a real estate professional, I often see military families overlook significant tax savings simply because they aren’t aware of the specific “military-only” rules.
In 2026, the tax landscape remains highly favorable for service members who choose to own their piece of the American dream. Whether you are currently stationed in a high-cost area like Arlington or preparing for a summer PCS, understanding these three levels of tax perks—federal, state, and local—is essential for your bottom line.
1. Federal Advantages: The “Warrior” Standard
The federal government offers several powerful deductions that specifically benefit the uniformed services.
- The Mortgage Interest Deduction: Even in 2026, you can deduct the interest paid on up to $750,000 of mortgage debt. Crucially, as a service member, your tax-free Basic Allowance for Housing (BAH) does not reduce this deduction. You get to use tax-free money to pay your mortgage and still get a tax break for doing so.
- The 15-Year Capital Gains Extension: Most civilians must live in their home for two of the last five years to avoid paying taxes on the profit when they sell. However, military members can “suspend” that five-year clock for up to 10 years during qualified official extended duty. This means you could live in a house for two years, move away for a decade on orders, and still sell that home tax-free (up to $500,000 for married couples).
- Permanent MI Deduction: Thanks to the One Big Beautiful Bill Act signed in 2025, the mortgage insurance (MI) premium deduction is now permanent for tax years beginning in 2026. If you have a conventional loan with less than 20% down, those monthly premiums are now a reliable tax deduction once again.
2. State-Level Savings: The Homestead Advantage
While federal taxes are uniform, state tax perks vary wildly. Many states have recently passed aggressive legislation to attract and retain military families.
For example, states like Florida, Texas, and Tennessee have no state income tax, making homeownership even more affordable. Other states, like Arizona, recently signed HB 2792 in February 2026, granting full property tax exemptions to veterans with a 100% service-connected disability. Even in states with high property taxes, “homestead exemptions” can shave thousands off your annual bill simply because you are a resident and a service member.
3. Local Relief: Disability and Retirement Perks
Local municipalities often provide the most direct relief, particularly for disabled veterans and retirees.
- Property Tax Exemptions: In many counties, including those in Northern Virginia and Maryland, veterans with a 100% service-connected, permanent, and total disability are exempt from paying property taxes on their primary residence.
- Retiree Income Exclusions: As of 2026, more states have moved to fully or partially exempt military retirement pay from state income tax. This increases your “disposable” income, making it easier to qualify for a larger mortgage or pay down your principal faster.
The Bottom Line
The tax code for 2026 is designed to reward your service through the stability of homeownership. Between the federal “Warrior Dividend” and local property tax relief, the savings are substantial. This President’s Day, take a moment to review your recent 1098 forms and local tax assessments. You’ve earned these benefits; make sure you’re using them.
