When Did Mortgage Interest Stop Being Deductible?

You can still claim the mortgage interest deduction, but under rules the One Big Beautiful Bill Act of 2025 made permanent, it covers interest on no more than $750,000 of home loan debt, and it only helps if your itemized deductions add up to more than the standard deduction. By the IRS’s own estimate, only about 8 percent of households now come out ahead by claiming it.

How Much Mortgage Debt Qualifies

Interest is deductible on up to $750,000 of combined mortgage debt if you file jointly or as a single filer, and up to $375,000 if you are married filing separately.¹ The cap applies to the total principal across all loans you use to buy, build, or substantially improve a first and second home. A mortgage on your main residence plus a loan on a vacation home have to fit under the same ceiling together.

Substantial improvement is a specific idea. Work that adds value, extends the home’s useful life, or adapts it to a new use qualifies. Ordinary maintenance like repainting or fixing a faucet does not, unless it is part of a larger qualifying renovation.² Keep loan documents, invoices, and closing disclosures so you can show where the borrowed money went if the IRS asks.

Older Loans and Refinancing

Mortgages taken out on or before December 15, 2017 keep the older $1 million limit ($500,000 if married filing separately). A binding written contract signed before that date to buy a principal residence also qualifies for the higher cap, as long as the purchase closed before April 1, 2018.²

Refinancing an older loan does not carry the $1 million ceiling over to new borrowing. The replacement mortgage keeps grandfathered status only up to the balance owed on the original loan just before the refinance. Anything you borrow beyond that balance is treated as new debt under the $750,000 rule. Refinance a $600,000 pre-2018 mortgage into a $700,000 loan to fund a renovation, and the first $600,000 stays under the old rules while the extra $100,000 counts against the current cap.²

Home Equity Loans and HELOCs

Before 2018, homeowners could deduct interest on up to $100,000 of home equity debt regardless of what they spent it on. That broad allowance is gone permanently. Interest on a home equity loan or line of credit is now deductible only when the money goes toward buying, building, or substantially improving the home that secures the loan.² Using a HELOC to consolidate credit cards or pay tuition no longer produces a deduction.

The home equity loan balance also counts against the overall $750,000 cap. If your primary mortgage is $700,000 and you take out a $100,000 home equity loan for a kitchen remodel, the combined $800,000 exceeds the limit, and interest is deductible on only $750,000 of the total.¹ When one loan funds both qualifying and non-qualifying purposes, you have to split the interest between the two shares and track how each dollar was spent.²

Why Most Homeowners Do Not Benefit

The debt limits matter, but the reason most homeowners no longer claim mortgage interest is the standard deduction. For the 2026 tax year, it is $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for head-of-household filers.³

To gain anything from mortgage interest, your total itemized deductions on Schedule A of Form 1040 — mortgage interest, state and local taxes, charitable contributions, and other qualifying expenses — have to exceed those numbers, and you only come out ahead by the amount they exceed it.⁴ A married couple paying $15,000 in mortgage interest and $8,000 in state taxes reaches $23,000, still below the $32,200 threshold. They get nothing from itemizing.

The state and local tax deduction adds another constraint. The SALT cap was $10,000 under the original 2017 law. The 2025 legislation raised it to $40,000 starting in 2025, with 1 percent annual increases through 2029, and a $20,000 per-person cap for married couples filing separately. The higher cap phases down for incomes above $500,000 and returns to $10,000 above $600,000. Even the larger SALT cap often is not enough, combined with mortgage interest, to clear the standard deduction in high-tax states.

Which Homes Qualify

The deduction applies to your main residence plus one additional second home. The IRS defines a home broadly here: condominiums, cooperatives, mobile homes, house trailers, and boats all qualify as long as the property has sleeping, cooking, and toilet facilities.² An RV or a sailboat can serve as a qualifying second home.

If you never rent the second home out, it qualifies automatically, and you are not required to spend any nights in it. Rent it out for part of the year and the rule changes: you must also use it personally for the longer of 14 days or 10 percent of the days it was rented at fair market value. Miss that threshold and the property is treated as rental real estate instead, and the second-home mortgage interest rules stop applying.²

Points and Mortgage Insurance

Points, sometimes billed as loan origination or discount fees, are upfront charges figured as a percentage of the loan principal. Points paid on a mortgage to buy or improve your principal residence are generally deductible in full in the year you pay them, if the charge is customary in your area, the amount does not exceed the local norm, you pay them with your own funds rather than money borrowed from the lender, and the settlement statement identifies them as points calculated on the loan principal.⁵

Seller-paid points are deductible for the buyer, but you have to reduce the home’s cost basis by the same amount. Points paid on a refinance or on a second-home mortgage generally cannot be deducted up front; you spread the deduction over the life of the loan instead.⁵

Private mortgage insurance, usually required when your down payment is under 20 percent, is treated as deductible mortgage interest again beginning with the 2026 tax year under the 2025 law. The deduction had lapsed for several prior years. PMI premiums count under the same $750,000 debt cap, apply only to mortgage insurance contracts issued after 2006, and only help if you itemize.² Your lender reports the amount you paid on Form 1098; include it on Schedule A alongside your mortgage interest.

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. IRS Releases Tax Inflation Adjustments for Tax Year 2026
4
Internal Revenue Service. About Schedule A (Form 1040), Itemized Deductions
5
Internal Revenue Service. Topic No. 504, Home Mortgage Points