What Is the $750,000 Mortgage Interest Deduction Cap?

If you took out your mortgage after December 15, 2017, you can deduct interest on up to $750,000 of home loan debt used to buy, build, or substantially improve your main home or a second home. That is the $750,000 mortgage interest deduction cap, and the One Big Beautiful Bill Act, signed in July 2025, made it permanent rather than letting it expire at the end of the 2025 tax year.¹ Mortgages originated on or before that December 2017 cutoff still qualify under an older $1 million limit.

How the Cap Applies to Your Loans

The $750,000 figure is a combined ceiling. It covers every qualifying mortgage you carry on your main home plus one second home, added together. Married couples filing jointly share a single $750,000 cap. Married filing separately, each spouse gets $375,000.¹

As long as your total balance across those loans stays at or below the cap, all the interest you paid during the year is deductible. Cross the cap and only a proportional share qualifies. More on that math below.

The IRS defines a qualifying home broadly. Any property with sleeping, cooking, and bathroom facilities counts, which includes traditional houses and condos as well as mobile homes, house trailers, and boats with living quarters.¹ If you own more than two, you pick which one serves as the second home each year.

Grandfathered Mortgages Still Get $1 Million

Loans taken out on or before December 15, 2017, keep the older $1 million cap, or $500,000 if married filing separately.² A narrow carve-out extends the same treatment to buyers who had a written binding contract before December 15, 2017, to close before January 1, 2018, and who completed the purchase before April 1, 2018.¹

Refinancing a grandfathered loan doesn’t automatically drop you to the lower cap. You keep the $1 million ceiling as long as the new loan balance doesn’t exceed what was left on the old one. Any cash-out amount above that old balance falls under the $750,000 rules.¹

Mixing a Pre-2018 Loan With a Newer One

If you carry both, the calculation blends them. Your grandfathered balance counts against the $1 million ceiling, and whatever room is left under $750,000 after subtracting that older balance is what remains for the newer loan. Suppose your grandfathered mortgage still has a $600,000 balance. The newer mortgage only qualifies for deductible interest on up to $150,000 of its balance, because $750,000 minus $600,000 leaves $150,000.²

What Happens When Your Balance Exceeds the Cap

Going over the limit doesn’t wipe out the deduction. It prorates it. The formula from Table 1 in Publication 936: divide the applicable debt limit ($750,000 or $1 million) by your total average mortgage balance for the year, then multiply that ratio by the total interest you paid.¹

Say your average balance is $1,000,000 and you paid $55,000 in interest. Under the $750,000 cap: $750,000 ÷ $1,000,000 × $55,000 = $41,250 deductible. The other $13,750 isn’t. Tax software runs this automatically, but knowing the mechanic explains why your deductible number won’t match the interest total printed on your Form 1098.

The Loan Has To Pay for the Home Itself

The cap only matters for interest that is deductible in the first place, and not every mortgage qualifies. The debt has to be acquisition indebtedness: money used to buy, build, or substantially improve the residence securing the loan.¹

A substantial improvement is one that adds to the home’s value, prolongs its useful life, or adapts it to new uses. Routine maintenance on its own doesn’t qualify, though costs like paint can be included when they’re part of a larger renovation.¹

Home equity loans and lines of credit follow the same rule. Interest is deductible only when the borrowed funds go toward buying, building, or improving the home securing the loan. Using a HELOC to pay off credit cards, cover tuition, or buy a car makes that interest nondeductible regardless of when the loan was originated, and the One Big Beautiful Bill Act made that restriction permanent.¹ Your lender doesn’t track how you spend the proceeds, so keep contractor invoices and receipts if any of the money went toward renovation work.

The Cap Only Matters If You Itemize

Mortgage interest is claimed on Schedule A. If you take the standard deduction instead, the $750,000 cap is beside the point because you aren’t deducting interest at all. For 2026, the standard deduction is $32,200 for married filing jointly, $16,100 for single filers and married filing separately, and $24,150 for heads of household.³

Itemizing pays off only when your mortgage interest, state and local taxes (capped at $40,000), charitable contributions, and other qualifying items together exceed the standard deduction for your filing status. Run the comparison each year. As your balance drops and interest payments shrink, the standard deduction can quietly overtake itemizing.

How To Claim It

Your lender sends Form 1098 by early February if you paid at least $600 in interest the prior year. Box 1 shows the interest paid, Box 2 shows outstanding principal, and Box 6 shows any points.⁴ Transfer the deductible amount to Schedule A, line 8a (interest reported on Form 1098) or line 8b (interest not on a 1098, such as a seller-financed mortgage).⁵

For a mortgage held by a private individual, no 1098 will arrive. Report the interest on line 8b along with the lender’s name, address, and taxpayer identification number. The IRS cross-checks this against the lender’s return.

Hold on to your loan documents, settlement statements, and Form 1098 for at least three years after filing. If any borrowed funds went toward renovations, keep the contractor invoices and receipts that back up your claim. In an audit, the burden of proof sits with you.

1
Internal Revenue Service. Publication 936 (2025), Home Mortgage Interest Deduction
2
Internal Revenue Service. Publication 530 (2025), Tax Information for Homeowners
3
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
4
Internal Revenue Service. Form 1098 (Rev. April 2025), Mortgage Interest Statement
5
Internal Revenue Service. Instructions for Schedule A (Form 1040) (2025)