Real Estate Taxes and Homeowner Deductions in Virginia

One of the big selling points of homeownership is the tax benefit. But it’s often overstated. Here’s what actually matters, starting with the tax you’ll definitely pay: local real estate tax.

This is general information, not tax advice. Talk to a tax preparer about your own return.

Real Estate Tax in Harrisonburg and Rockingham County

Real estate tax is set locally, and the City of Harrisonburg and Rockingham County have separate rates.

Both localities bill real estate tax in two halves, due June 5 and December 5. Properties inside an incorporated town in Rockingham County may also owe a town real estate tax, so check with the town.

Example: A Rockingham County home assessed at $345,000 owes about $2,277 a year in county real estate tax, or about $190 a month. The same assessment in the city is about $3,485 a year, or about $290 a month. Most lenders collect this monthly through your escrow account.

Assessments are based on market value and are updated on each locality’s reassessment schedule. Your assessed value and your sale price won’t always match.

Homeowner Tax Deductions

If you itemize on your federal return, homeownership can create a few deductions.

Deductible Costs (if you itemize)

Mortgage interest (the big one)

• Interest on up to $750,000 of mortgage debt used to buy, build, or improve your home ($375,000 if married filing separately; loans from before December 16, 2017 may have a higher limit)
• Early in the loan, most of each payment is interest; later, more goes to principal
• For example, on a $310,500 loan at a 6.5% rate, first-year interest is roughly $20,000, and it declines each year after that

State and local taxes, including real estate tax

• Deductible up to the SALT cap, which is $40,400 for most filers in 2026 ($20,200 if married filing separately), per the IRS 2026 tax refresher outline (Publication 6079)
• The cap phases down at high incomes, but not below $10,000
• Local real estate tax in our area is well under that cap for most homes

Mortgage insurance premiums

• The rules on deducting PMI and FHA mortgage insurance have changed several times in recent years. Ask your tax preparer what applies for the year you’re filing.

Non-Deductible Costs

Home repairs and maintenance (not deductible on a personal residence)

• But capital improvements like a new roof or HVAC system add to your “cost basis,” which can reduce your taxable gain when you sell

Depreciation

• Only available on rental or business property, not your own home

Homeowners insurance

• Not deductible on a personal residence

The Itemized vs. Standard Deduction Question

Here’s the catch: for tax year 2026, the standard deduction is $16,100 (single), $24,150 (head of household), or $32,200 (married filing jointly), per the IRS 2026 inflation adjustments. You only benefit from mortgage interest and real estate tax deductions if your total itemized deductions beat that.

Example (joint return):

• Mortgage interest: $15,000
• Real estate tax: $2,500
• Total itemized deductions: $17,500

The standard deduction for a joint return is $32,200, so you’d take the standard deduction. In this example, the mortgage interest and real estate tax produce no extra federal tax benefit.

Only if your other itemized deductions (state income tax, charitable gifts, and so on) push you past the standard deduction does mortgage interest start to save you tax.

Bottom line: For many homeowners, the tax benefit of owning is smaller than people think. The bigger financial benefit is building equity.

What Happened to the Mortgage Credit Certificate (MCC)?

You may have read that Virginia offers a Mortgage Credit Certificate, a federal tax credit for first-time buyers. According to Virginia Housing, the MCC program has been suspended since May 1, 2023. New buyers can’t get one right now.

If you received an MCC before the suspension, it generally stays valid as long as you still live in the home and haven’t sold or refinanced. Ask your lender about other first-time buyer programs that are currently available.

Capital Gains Tax When You Sell

If you buy at $345,000 and sell at $400,000, you have a $55,000 gain (before adjustments for improvements and selling costs). Federal tax law gives homeowners a break:

Section 121 home sale exclusion:

• If you owned and lived in the home as your main home for at least 2 of the last 5 years, you can exclude up to $250,000 of gain
• On a joint return, the exclusion can be up to $500,000

Example: Buy at $345K, sell at $600K, for a $255K gain. On a joint return that qualifies for the full $500K exclusion, the taxable gain is $0. On a single return, $5K of the gain would be taxable.

This applies to a home you have owned and lived in as your main home; a former rental can qualify, but rental years after 2008 before you moved in can reduce the exclusion, and the depreciation portion of your gain is still taxed. It’s one of the biggest tax advantages of owning.

Key Takeaways

• City of Harrisonburg: $1.01 per $100 assessed (July 1, 2026 to June 30, 2027). Rockingham County: $0.66 per $100 (2026).
• On a $345,000 assessment: about $3,485 a year in the city, about $2,277 in the county
• Mortgage interest and real estate tax deductions only help if you itemize, and many homeowners don’t
• Virginia Housing’s MCC program is suspended (since May 1, 2023)
• The home sale exclusion lets you exclude up to $250,000 of gain, or $500,000 on a joint return
• Talk to a tax preparer about your specific situation

Before You Close

Ask your lender or tax preparer:

• Should I expect to itemize or take the standard deduction?
• What first-time buyer programs are available right now?
• What will my monthly escrow for real estate tax be?

Call me at (540) 246-9067 with questions.