Is Mortgage Interest Deductible? Limits, Points, and Itemizing

Mortgage interest is deductible on your federal return if you itemize, you are legally liable on a loan secured by a qualifying home, and your total mortgage debt stays within the federal limit — $750,000 for most current homeowners, or $1,000,000 for loans taken out before December 16, 2017. The deduction reduces your taxable income by the interest you paid during the year, but several conditions control which loans, properties, and dollar amounts actually qualify.

Who Can Claim the Deduction

Three conditions have to line up. You must be legally responsible for the debt, meaning your name is on the loan as a borrower or co-borrower. Paying someone else’s mortgage generally does not entitle you to the deduction.¹

The loan must be secured by the home, so that the lender can foreclose if you stop paying. A mortgage, deed of trust, or land contract all count. An unsecured personal loan does not, even if you spent the money on your house.²

And you have to itemize deductions on Schedule A. If you take the standard deduction, you cannot also deduct mortgage interest.³

There is one narrow exception on the ownership side. Tax courts have recognized “equitable ownership,” where someone not named on the mortgage may still claim the deduction if they make all the mortgage payments, pay the property taxes and maintenance, and are the sole occupant. It is fact-specific, and simply chipping in on a relative’s payment does not qualify.

Which Homes and Loans Qualify

You can deduct interest on up to two homes: your main residence plus one second home. Your main home is where you live most of the time. A second home is one you designate, but if you rent it out at any point during the year, you also have to use it personally for the longer of 14 days or 10 percent of the days it was rented at fair market rates. Fall short of that, and the property is treated as a rental instead.²

The home does not have to be a traditional house. Condos, co-ops, mobile homes, house trailers, and boats all qualify, as long as the property has sleeping, cooking, and toilet facilities.²

Pure rental or investment property is a different track. That interest is a rental expense on Schedule E, not an itemized deduction, and is not governed by the limits below.

How You Used the Borrowed Money Matters

The tax code splits home-secured debt into two categories. “Acquisition indebtedness” is money borrowed to buy, build, or substantially improve a qualifying home, secured by that same home. Interest on acquisition debt is deductible within the dollar limits below.¹

Home equity loans and lines of credit are stricter. Under rules first enacted in the Tax Cuts and Jobs Act of 2017 and extended through at least 2029 by the One, Big, Beautiful Bill Act, interest on a home equity loan is deductible only when the borrowed money is used to buy, build, or substantially improve the home securing the loan. Use a HELOC to pay off credit cards or cover tuition, and that interest is not deductible.²

How Much Mortgage Debt the Deduction Covers

The cap depends on when you took out the loan. For mortgages originated after December 15, 2017, you can deduct interest on up to $750,000 of qualifying home debt, or $375,000 if you are married filing separately. That ceiling covers the combined balance on your main home and second home.²

Loans taken out before December 16, 2017, are grandfathered at the older, higher limit: $1,000,000, or $500,000 if married filing separately.²

Refinancing a grandfathered mortgage keeps the $1,000,000 limit, but only up to the principal balance remaining at the time of the refinance. Any cash you take out on top falls under the $750,000 limit, and only if you spend that extra money on home improvements.²

If your balance is above the cap, you do not lose the entire deduction. You divide the applicable limit by your average mortgage balance for the year, then multiply by the total interest paid. On an average balance of $900,000 with a $750,000 limit, that works out to roughly 83 percent of your interest being deductible. Publication 936 walks through the calculation in Table 1.²

Points, Prepayment Penalties, and Mortgage Insurance

Points — upfront fees paid to lower your interest rate — count as mortgage interest. On the purchase of a main home, you can generally deduct the full amount in the year you paid them, provided the points are computed as a percentage of the loan, paying points is customary in your area, the charge is not unusually high, and you brought at least that much of your own money to closing. Money borrowed from the lender does not count toward that last requirement.

Points on a refinance are handled differently. You spread the deduction evenly over the life of the new loan rather than taking it all in the first year. Points paid on a principal residence purchase show up in Box 6 of your Form 1098.⁴

Prepayment penalties are deductible too, as long as the charge is not a fee for a specific service the lender performed. This applies regardless of when the mortgage was originally issued.²

Starting with the 2026 tax year, private mortgage insurance premiums on acquisition debt are treated as deductible mortgage interest under the One, Big, Beautiful Bill Act, signed into law on July 4, 2025. PMI is usually required when your down payment is under 20 percent. Earlier versions of this deduction had lapsed; the new law reinstates and expands it, and unlike prior versions, does not include an income-based phaseout. The IRS may issue additional guidance as it implements the change.

Whether Itemizing Actually Pays Off

Since mortgage interest only helps you if you itemize, the real question is whether your itemized deductions together beat the standard deduction. For 2026, the standard deduction is:⁵

Single filers: $16,100
Married filing jointly: $32,200
Head of household: $24,150
Married filing separately: $16,100

Add up your mortgage interest, state and local taxes (within the SALT cap), qualifying medical expenses, and charitable contributions. If the total is more than the standard deduction for your filing status, itemizing wins. For most homeowners, mortgage interest is the largest single itemized expense and the reason itemizing is worth doing at all.

One wrinkle affects high-tax states. The SALT deduction, which covers state income tax and property tax, is capped at $40,000 for most filers in 2025, rising about 1 percent a year through 2029 (roughly $40,400 in 2026). The cap is $20,000 for married filing separately and phases down toward $10,000 once modified adjusted gross income tops $500,000. Property tax counts against that cap, so some homeowners find the SALT limit trims the payoff from itemizing even when their mortgage interest is sizable.

Reporting the Deduction

Your lender sends Form 1098, the Mortgage Interest Statement, by January 31 each year. Box 1 shows total interest received during the prior year, Box 2 shows the principal balance as of January 1, Box 3 shows the mortgage origination date (which determines your debt limit), and Box 6 shows points on a principal residence purchase.⁶

You put the Box 1 amount on Schedule A, Line 8a of Form 1040. If your mortgage balance is over the applicable cap, work out the deductible share using the Publication 936 worksheet rather than copying Box 1 directly.²

Hold onto receipts and contracts for any home improvement project you funded with a home equity loan or HELOC. Those records are what prove the borrowed funds went to a qualifying use, which is what makes the interest deductible in the first place.

1
Office of the Law Revision Counsel. 26 USC 163 – Interest
2
Internal Revenue Service. Publication 936, Home Mortgage Interest Deduction
3
Internal Revenue Service. Deductions for Individuals: The Difference Between Standard and Itemized Deductions, and What They Mean
4
Internal Revenue Service. Home Mortgage Points
5
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill
6
Internal Revenue Service. Instructions for Form 1098