Mortgage interest tax credits benefit some homeowners, but it may be pointless to take advantage of them if mortgage interest is lower than the standard deduction.
How much mortgage interest can I deduct?
Mortgage Interest Tax Deduction allows you to deduct interest paid from federal taxable income on eligible mortgage obligations of up to $750,000 (up to $375,000 if you are married separately). This applies to mortgages earned after December 15th, 2017.
If you obtain a mortgage from October 13, 1987 or before December 16, 2017, you can deduct a mortgage debt of up to $1 million, or interest of up to $500,000 if you get a mortgage loan from October 13, 1987. If you obtain a mortgage before October 13th, 1987, there is no cap.
These rules are the result of the 2017 Tax Cuts and Employment Act. Many of the provisions of this Act expire on December 31, 2025, so rules for tax years after 2026 may change again.
The deduction applies to all mortgages related to what the IRS considers as a “qualified” home. This includes the main or primary home and the second home if you are unable to rent a second home or rent it for a part of that year, as well as use it yourself that year.
What are the mortgage interest eligible?
The IRS believes that mortgage interest is the interest paid on a loan protected by the main or main home or second home. However, you can also amortize other mortgage-related expenses through mortgage interest deductions. The overview is as follows:
- Interest in mortgages in your main home: This is the interest paid on the mortgage in your main or main home where you mostly or always live. This can be anything from detached houses to condominiums, trailers and boats, as long as there’s a place to sleep, cook and use the bathroom.
- Interest in a mortgage in a second home: This is the interest paid on your second home’s mortgage. If you rent a second home to qualify for the deduction, you will need to use your own 14 or more days, or 10% or more of the number of days you rented the home. Otherwise, it will be considered a rental property rather than a second home and subject to a different set of tax rules. If you have multiple properties, if you consider a second home, you can only deduct interest related to any of the annual property.
- Home Equity Credit Line (HELOC) or Loan Interest For main or eligible second homes: This profit can only be deducted if the loan is used to purchase, build, or improve the property.
- Interest in mortgages for homes under construction: The deduction applies to interest paid on loans tied to homes under construction for up to 24 months.
- Interest in mortgages for homes sold: You can deduct interest on mortgages on eligible homes sold, but do not include the date of sale.
- Late payment fee: If you are charged late fees for your mortgage payments, you can usually include them in your mortgage interest deduction.
- Prepaid penalty: If you pay off your mortgage early and get charged a prepayment penalty, it can usually be included in your mortgage interest deduction.
- point: If you pay points to lower your interest rate, depending on your circumstances, you can either deduct them entirely in the year they were paid, or spread the deduction over the lifespan of your mortgage. This IRS flow chart will help you determine which one applies to.
Which mortgage costs can’t be deducted?
Here are the mortgage-related expenses that cannot be included as part of your mortgage interest deduction:
- Closure costs excluding points
- down payment
- Mortgage principal payments that include additional or additional payments
- Mortgage insurance fees
- Homeowner Insurance
- Reverse mortgage interest
Should I claim an interest deduction on my mortgage?
You can only request a mortgage interest deduction if you itemize the deduction by filing Form 1040 or an equivalent Schedule A. For many homeowners, the standard deduction is higher than the itemized deduction. The standard deductions for the 2024 and 2025 tax years are as follows:
| Submission Status | Standard Deduction for the 2024 Tax Year | Standard Deduction for the 2025 Tax Year |
|---|---|---|
| single | $14,600 | $15,000 |
| Household head | $21,900 | $22,500 |
| We got married jointly | $29,200 | $30,000 |
| Qualifying Widow (ER) | $29,200 | $30,000 |
| Separately married filing | $14,600 | $15,000 |
If you’d prefer to make an item, you’ll be asking for a mortgage interest deduction in the year the interest was paid. For points, you may include them entirely in the year they were paid.
You don’t need to track interest on mortgages you paid over the year. A mortgage lender or servicer will use this information to submit form 1098 in late January or early February.
