What Is the Mortgage Interest Deduction?

What Is the Mortgage Interest Deduction?

The mortgage interest deduction lets you deduct a limited amount of mortgage interest from your taxable income, lowering the amount of tax you owe. The deduction is only available if you choose to itemize your deductions instead of claiming the standard deduction. It only applies to interest on secured debt taken out to buy, build or substantially improve your first or second home.

Learn more: What Can You Deduct on Your Taxes?

How the Mortgage Interest Deduction Works

The mortgage interest deduction applies to different types of mortgage interest, including interest charged monthly as part of your regular mortgage payment and points paid when you finance or refinance your home. However, basic rules and limitations apply.

• The loan must be secured by your home. For interest to be deductible, the loan must use your home as collateral. A personal loan you've used to fix up your house doesn't qualify as mortgage interest.
• The home must be qualified. A qualified home is your main home or second home. It can be a house, condominium, cooperative, mobile home, house trailer, boat or other property that has sleeping, cooking and toilet facilities. It can't be a rental or investment property.
• The mortgage must be used to buy, build or substantially improve your home. This includes money you receive from home equity loans, home equity lines of credit (HELOCs) or credit card loans secured by your property, as well as any additional cash you've taken out in a refinance. If the money is used to pay down credit card debt or finance your kids' college education, it's not deductible.

Mortgage Interest Deduction Limits

You can only deduct mortgage interest on the first $750,000 of debt carried on your primary or secondary home. That decreases to $375,000 if you're married filing separately. If your mortgage is larger than these limits, you can only deduct the portion of your interest that applies to a $750,000 loan balance, or a loan balance of $375,000 if you're married filing separately.

There are a few exceptions:

• If you took out your mortgage on or before October 13, 1987, your mortgage interest is fully deductible without limits.
• If your mortgage originated between October 13, 1987, and December 16, 2017, your deduction is limited to the interest on $1 million ($500,000 if married filing separately). The same limit applies if your home was purchased before April 1, 2018, with a binding contract entered before December 15, 2017, and closing before January 1, 2018.

What Qualifies for the Mortgage Interest Deduction?

The interest on qualifying homes and mortgages is deductible. But, since mortgage interest can take more than one form, here's a quick rundown on what your deductible amount might include:

• The interest portion of your monthly mortgage payments: The portion of your payment that goes toward paying down principal is not deductible.
• Interest paid on a qualifying home equity loan or line of credit: If the money is being used to buy, build or substantially improve your home, it's deductible.
• Prepaid points on a home loan or refinancing: In narrow circumstances, you may be able to deduct points in full during the year you finance or refinance. More often, you can deduct points in equal installments over the life of the loan.

You may also be able to deduct late payment fees and prepayment penalties on a qualifying mortgage.

What Doesn't Qualify for the Mortgage Interest Tax Deduction?

Other than late payment and prepayment fees, noninterest expenses generally can't be included in the mortgage interest deduction. You can't deduct homeowners insurance premiums, for example, or routine maintenance costs like gardening. Additionally, the following items aren't deductible:

• Mortgage insurance premiums
• Mortgage interest on a third, fourth, fifth (and so on) home
• Interest on unsecured debt, such as personal loans or credit cards
• Interest on debt that is not used to buy, build or improve your home
• Interest accrued on a reverse mortgage

Learn more: What to Expect for Your First Tax Season as a Homeowner

How to Claim the Mortgage Interest Deduction

To claim the mortgage interest deduction on your federal tax return (or decide whether doing so is worth your while), follow these four steps.

1. Choose a Standard or Itemized Deduction

First do a quick estimate of your potential deductions. Add the mortgage interest you paid for the year to any charitable deductions, student loan interest paid, qualifying medical or dental expenses and other deductions you have. Compare your itemized deductions to the standard deduction you're allowed to take. For the 2025 tax year, standard deductions are:

• $15,000 for single filers and married people filing separately
• $30,000 for married couples filing jointly
• $22,500 for heads of households

Choose whichever option gives you the larger deduction. If it's the standard deduction, you can skip the next steps and file without itemizing (forgoing the mortgage interest deduction).

2. Get Form 1098

IRS Form 1098 shows how much mortgage interest you paid for the year. If you paid at least $600 in mortgage interest, your lender will send a copy of Form 1098 both to you and to the IRS. Check the amount shown on the 1098 against your own records. If the amount is correct, report it on your taxes; it's a good idea for the numbers on your tax return to match the numbers on your 1098. If the interest reported on your 1098 is wrong, contact your lender and ask them to issue a corrected form.

Tip: If you purchased your home or refinanced last year, review the closing statement from your loan to see how much you paid (if anything) in points.

3. Itemize Your Deductions

Use Schedule A: Itemized Deductions to calculate your total deductions, including your mortgage interest deduction. You'll enter your total itemized deduction on line 12 of Form 1040.

4. File Your Taxes

Keep your tax return and all related documents, including Form 1098, on file for at least three years, in case the IRS has any questions about your return.

Mortgage Interest Deduction Examples

Here's how claiming the mortgage interest deduction might work in real life. These hypothetical examples show when choosing to itemize makes sense—and when opting for the standard deductions instead might save you money.

When to Itemize Your Deductions

Aaron is a single taxpayer who purchased his home with a $500,000 mortgage. He pays $19,100 in mortgage interest in 2025, as shown on his 1098 form. Aaron's interest payments are greater than the standard deduction of $15,000, so he chooses to itemize and claim the mortgage interest deduction on his tax return. Because Aaron is in the 32% tax bracket, the additional $4,100 in deductions saves him about $1,312 in taxes.

When to Take the Standard Deduction

Marie and Ken have a $320,000 mortgage on their primary home and a $170,000 mortgage on a vacation home. The mortgage interest on their two homes equals $19,121 in 2025. Even with charitable deductions of $3,000, their itemized deductions do not exceed the standard deduction for married couples filing jointly, $30,000. Marie and Ken choose the standard deduction, which gives them a larger tax incentive and saves them the trouble of itemizing.

Frequently Asked Questions

The Bottom Line

The mortgage interest deduction can help you afford a home by saving you money on your income taxes. Although taking the deduction means itemizing on your tax return, the tax savings can be worthwhile if your deductible expenses are high enough.

On the other hand, itemizing deductions can require a bit more calculation, paperwork and familiarity with the tax code. If you think you'd like to itemize but aren't sure how, you may want to work with a tax advisor, who can help you navigate the details and choose the options that work best for you.

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