If you’re a veteran, active-duty service member, or surviving spouse planning to buy a home with a VA loan this year, there’s a change you need to know about.
Starting in 2026, the VA funding fee is now tax-deductible – if you itemize your deductions.
This is a big deal – and most veterans haven’t heard about it yet.
What Is the VA Funding Fee?
The funding fee is a one-time payment made at closing when you use a VA-backed home loan. It helps keep the VA loan program running so that future generations of service members can access the same benefit.
The fee typically ranges from 0.5% to 3.3% of your loan amount, depending on a few factors: whether it’s your first time using the benefit, how much you put down, and the type of loan. (For a full breakdown, see our VA funding fee explained guide.)
For example, on a $350,000 home purchase with no down payment, a first-time VA loan user would pay a funding fee of $7,525. That’s a meaningful amount – and now it’s potentially deductible on your taxes.
What Changed?
The VA announced on February 18, 2026, that eligible borrowers can now deduct the funding fee when filing their taxes – provided they itemize their deductions rather than taking the standard deduction. This applies to VA purchase loans closed in 2026 and going forward.
This is a new benefit that wasn’t available in previous tax years, so if you’re buying a home this year, you’ll want to factor this into your financial planning.
Who Qualifies?
The deduction is available to veterans, active-duty service members, and surviving spouses who pay a funding fee on a VA home loan.
It’s worth noting that some borrowers are already exempt from paying the funding fee entirely. You may be exempt if you:
- Receive VA compensation for a service-connected disability
- Are a Purple Heart recipient currently serving on active duty
- Are a surviving spouse receiving Dependency and Indemnity Compensation (DIC)
If you fall into one of these categories, you don’t pay the fee at all – which is an even bigger savings.
How Much Could This Save You?
That depends on your specific tax situation and the size of your funding fee. But to give you a rough idea: if your funding fee is $8,000 and you’re in the 22% tax bracket, that deduction could put roughly $1,760 back in your pocket at tax time.
Keep in mind, this only applies if you itemize your deductions. If you take the standard deduction (which most people do), this won’t apply. That said, between mortgage interest, property taxes, and now the funding fee, itemizing may make more sense than you think – especially in your first year of homeownership.
The exact impact will vary, so it’s worth talking to a tax professional about how this applies to your situation.
What Should You Do Next?
If you’re thinking about buying a home in 2026, here’s what I’d recommend:
Get your Certificate of Eligibility (COE). This confirms your VA loan entitlement and helps determine your funding fee amount.
Talk to a VA loan specialist. Not all loan officers understand the nuances of VA loans – military pay structures like BAH and BAS, the COE process, or how disability ratings affect your costs. Working with someone who specializes in VA loans can save you time, money, and frustration.
Connect with a tax professional. I’m a mortgage loan officer, not a tax advisor. But I can tell you this deduction is worth exploring with someone who is.
Don’t wait to get pre-approved. The spring market is heating up, and buyers who are prepared have a real advantage right now. A pre-approval costs nothing and doesn’t commit you to anything.
About TrueVet Mortgage
I’m Scott Carlin, founder of TrueVet Mortgage and a 20-year Air Force veteran. I specialize in VA loans because I’ve lived the military life – the PCS moves, the unique pay structures, the financial challenges that come with service. I started TrueVet Mortgage to help fellow veterans and military families in Florida and Texas navigate the home loan process with someone who speaks their language.
If you have questions about the funding fee, your VA loan entitlement, or anything else about buying a home, I’m happy to help. Check out our VA loan FAQ or reach out directly. No pressure, no obligation – just straight answers.
Schedule a free consultation or call me directly at 321-364-4461.
Scott Carlin | TrueVet Mortgage | NMLS #2613509 TrueVet Mortgage is a DBA of Xpert Home Lending, Inc. (NMLS #2179191) Licensed in Florida and Texas
Disclaimer: This post is for informational purposes only and is not intended to be, and should not be construed as, tax, legal, or accounting advice. Consult your own tax advisor regarding your specific situation. All loans are subject to credit approval and property appraisal. This is not a commitment to lend.