Veterans Affairs (VA) Loan and Taxes: What Homeowners Should Know This Year

Tax season has a way of sneaking up on you. And if you’re a veteran or current homeowner with a Veterans Affairs (VA) loan, or you’re thinking about getting one, you might be wondering: is there anything here that I should know about?

The short answer is possibly, yes. Homeownership comes with several costs that may have tax implications, and VA loan borrowers have at least one specific item worth knowing about that other mortgage holders don’t.

That said, tax rules are not one-size-fits-all. Your filing status, income, and whether you itemize deductions all affect how tax benefits of a VA loan actually apply to your situation. Think of this article as a starting point, something to prime you for a conversation with a qualified tax professional who can look at your specific circumstances.

What Tax Benefits Are Common for Homeowners?

When you own a home, a few of the costs associated with your mortgage may be deductible on your federal tax return, but only if you itemize your deductions rather than taking the standard deduction.

Here’s a quick look at what that means: every year, the Internal Revenue Service (IRS) sets a standard deduction amount that taxpayers can claim without tracking individual expenses. For many people, that amount is higher than what they’d get by itemizing. But for others, particularly those with a mortgage, itemizing may make more sense.

Whether itemizing is right for you depends on your individual situation. That’s a conversation worth having with a tax professional before you file. With that foundation in place, here are some of the specific items that may come into play for VA loan homeowners.

Mortgage Interest Deduction Basics

One of the more well-known potential deductions for homeowners is the mortgage interest deduction. If you itemize, you may be able to deduct the interest you paid on your mortgage during the tax year.

This deduction applies to VA loans just as it does to conventional mortgages. Your lender or loan servicer will typically send you a Form 1098 each year, which shows the total mortgage interest you paid. That’s the document you’ll want to hold onto and share with your tax preparer.

A few things to keep in mind:

• For loans originated after December 15, 2017, the IRS generally allows the deduction on interest for up to $750,000 of mortgage debt. (For loans originated before that date, the limit is generally $1 million.)
• This is a general framework, though. Your specific deductible amount depends on your loan balance, filing status, and other factors.
• Again, a tax professional can help you determine what applies to your situation.

Are Mortgage Points Deductible?

When you closed on your home, you may have paid mortgage points, also called discount points, as part of your loan terms. In some cases, these may be deductible.

The rules around points can be a bit nuanced. Generally speaking, points paid on a loan to buy or build a primary residence may be deductible in the year they were paid, provided certain IRS requirements are met. Points paid on a refinance, on the other hand, are typically deducted over the life of the loan rather than all at once.

If you’re not sure whether you paid points or what category they fall into, your Closing Disclosure, the document you received at settlement, will have that information. It’s a good document to keep on file. As always, the specifics can vary. A tax professional can help you determine whether and how points apply to your return.

The VA Funding Fee: A New Deduction Worth Knowing About

The VA funding fee is a one-time fee charged on most VA loans. It helps offset the cost of the VA loan program for taxpayers and is paid either upfront at closing or financed into the loan amount. The fee amount varies based on factors like your down payment, loan type, and whether it’s your first time using a VA loan.

According to the VA, as of 2026, borrowers who paid a VA funding fee may be able to deduct it similarly to mortgage interest, whether the fee was paid upfront or rolled into the loan.

Some things to know:

• Some veterans are exempt from the funding fee entirely, typically those receiving VA compensation for a service-connected disability. If you were exempt, this deduction wouldn’t apply.
• If you financed the fee into your loan, your Form 1098 may or may not reflect it separately. Check with your tax preparer about how to handle this.
• Tax laws can and do change. Confirm with a tax professional that this deduction is still available for the current tax year.

Property Taxes and Common Limits (High-Level)

Property taxes are another area where homeowners may see a tax benefit. In many cases, the property taxes you pay on your home may be deductible on your federal return if you itemize.

However, there’s an important cap to be aware of: under current federal law, there is a cap on the total amount you can deduct for state and local taxes (known as the SALT deduction). This limit applies regardless of your loan type. Your tax preparer can help you navigate that.

One additional thing worth looking into: many states offer tax exemptions specifically for veterans, particularly those with service-connected disabilities. These are separate from the federal deduction and vary by state. Your state’s department of revenue or Veterans Affairs office is a good place to start if you want to explore what might be available where you live.

Final Thoughts

Tax season doesn’t have to feel like a guessing game. As a VA loan homeowner, there are a handful of expenses that you should carefully track, from mortgage interest to the VA funding fee. But what VA loan tax benefits apply to your specific situation depend on a lot of factors that only a qualified tax professional can fully sort through. Hopefully, this article gave you a helpful starting point as you head into that conversation with your tax preparer.

Disclaimer: This article is intended for general informational and educational purposes only and should not be construed as financial or tax advice. For more information on financial planning or investment advice, consult a registered investment advisor or financial planner.