Mortgage interest is tax deductible only if you itemize deductions, and only on loans up to $750,000 of the home's purchase price

Most homeowners cannot deduct their mortgage payments. You can deduct the interest portion of your mortgage payment, but only if two things are true: you itemize deductions on your tax return instead of taking the standard deduction, and your total mortgage debt does not exceed $750,000 (or $375,000 if you are married filing separately). The principal portion of your payment — the part that builds equity in your home — is never deductible.

The standard deduction for 2024 is $14,600 for single filers and $29,200 for married couples filing jointly. Most homeowners find that the standard deduction is larger than the total of all their itemized deductions combined, which means they get no tax benefit from mortgage interest at all. You only benefit from deducting mortgage interest if your itemized deductions exceed the standard deduction for your filing status.

Key Takeaways

  • Only the interest portion of your mortgage payment may be deductible; principal is never deductible.
  • You must itemize deductions instead of taking the standard deduction to claim mortgage interest, and itemizing only helps if your total deductions exceed $14,600 (single) or $29,200 (married filing jointly).
  • The deduction applies only to mortgage debt up to $750,000 of the home's purchase price, or $375,000 if married filing separately.
  • You can deduct interest on a mortgage for your primary home or one other home, but not on investment properties or rental homes.
  • Your mortgage lender sends Form 1098 each January showing how much interest you paid in the previous year.

How to tell if you are paying interest or principal

Your mortgage lender breaks down each payment into interest and principal. Early in the loan, most of your payment goes to interest; later, most goes to principal. Your monthly statement shows both amounts, and your lender sends you Form 1098 each January listing the total interest you paid during the previous year.

You can also calculate it yourself. Multiply your loan balance by your interest rate and divide by 12. That is your interest for one month. The rest of your payment is principal. As your balance drops, the interest portion shrinks and the principal portion grows.

When itemizing deductions makes sense

Itemizing is worth doing only if your total deductions exceed the standard deduction. Add up mortgage interest, property taxes, state and local income taxes (capped at $10,000 per year), charitable donations, and any other deductible expenses. If that sum is larger than $14,600 (single) or $29,200 (married filing jointly), itemize. Otherwise, take the standard deduction.

Many homeowners with mortgages still do not itemize because their mortgage interest alone does not reach the standard deduction threshold. A homeowner with a $300,000 mortgage at 6.5% interest pays roughly $19,500 in interest during the first year. Add $5,000 in property taxes and $2,000 in charitable donations, and the total is $26,500 — enough to itemize if married filing jointly. But a single filer with the same mortgage and deductions would be close to the $14,600 threshold and might not benefit.

The $750,000 mortgage debt limit

You can deduct interest only on the first $750,000 of mortgage debt (or $375,000 if married filing separately). This limit applies to the total of all mortgages on your primary home and one other home combined. If you took out a mortgage for $800,000, you can deduct interest only on $750,000 of it.

The limit is based on the original loan amount at the time you took out the mortgage, not the current balance. If you borrowed $700,000 five years ago and still owe $650,000, the $700,000 original amount is what counts toward the limit.

Which homes may have access to and which do not

You can deduct mortgage interest on your primary residence and one other home — typically a vacation home or cabin that you own and use personally. You cannot deduct interest on investment properties, rental homes, or homes you own but do not live in or use.

If you own multiple homes, you choose which two may have access to for the deduction. If you have mortgages on three homes, you can deduct interest on the two with the highest balances, or you can choose differently based on your tax situation. This choice is made on your tax return each year.

Home equity loans and lines of credit

Interest on a home equity loan or home equity line of credit (HELOC) is deductible under the same rules as mortgage interest — only if you itemize, only up to $750,000 total debt, and only if the loan is secured by your primary home or one other home. The money must have been used to buy, build, or substantially improve the home that secures the loan. If you borrowed against your home to pay off credit cards or buy a car, that interest is not deductible.

A home equity loan taken out before December 16, 2017, may have different rules. Consult a tax professional if your loan predates that change.

How to claim the deduction on your tax return

If you itemize deductions, you report mortgage interest on Schedule A (Form 1040). Your lender provides Form 1098 showing the interest paid during the year. Enter that amount on the line for mortgage interest. If you have multiple mortgages or a home equity loan, add all the interest together, but remember the $750,000 debt limit applies to the total.

You file Schedule A along with your Form 1040. Tax software walks you through this process, or a tax professional can handle it for you. If you take the standard deduction instead, you do not file Schedule A and receive no deduction for mortgage interest.

Frequently Asked Questions

Can I deduct mortgage payments if I do not itemize?

No. The mortgage interest deduction is only available if you itemize deductions on Schedule A. If you take the standard deduction, you cannot deduct mortgage interest. Most homeowners take the standard deduction because it is larger than their itemized deductions.

Is the principal part of my mortgage payment ever deductible?

No. Principal is never deductible. Only the interest portion of your payment may may have access to for a deduction, and only under the conditions described above. Your lender's statement shows how much of each payment is interest and how much is principal.

What if I paid off my mortgage early — can I deduct the interest I did not pay?

No. You deduct only the interest you actually paid during the tax year. If you pay off your mortgage in June, you deduct the interest paid through June. You cannot deduct interest on future payments you will not make.

Can I deduct mortgage interest on a rental property?

No. The mortgage interest deduction applies only to your primary home and one other home you own and use personally. Rental properties and investment homes have different tax rules. Consult a tax professional about deductions for rental property expenses.

Do I need to file Form 1098 to deduct mortgage interest?

Your lender sends Form 1098 to you and the IRS, but you can deduct mortgage interest even if you do not receive it. If your lender fails to send it, you can still claim the deduction based on your own records. However, having Form 1098 makes the process simpler and provides documentation if the IRS asks questions.