The mortgage interest deduction lets you subtract the interest you paid on your home loan from your taxable income

When you take out a mortgage, you pay both principal (the amount borrowed) and interest (the lender's fee). The mortgage interest tax deduction allows you to deduct the interest portion on your federal tax return, which lowers the income the IRS taxes you on. This means if you paid $8,000 in mortgage interest last year and you itemize deductions, you can subtract that $8,000 from your taxable income.

The deduction applies only to interest, not to principal payments, property taxes, homeowners insurance, or mortgage insurance premiums (though mortgage insurance premiums became deductible again in 2024 under current law, subject to income limits). You must itemize deductions on your tax return to claim it — you cannot take the standard deduction and the mortgage interest deduction at the same time.

The deduction is capped at interest paid on loans up to $750,000 of mortgage debt if you are married filing jointly, or $375,000 if you are single or married filing separately. This limit applies to mortgages taken out after December 15, 2017. If your mortgage predates that, the cap is $1,000,000.

Key Takeaways

  • You deduct only the interest portion of your mortgage payment, not the principal, and only if you itemize deductions on your tax return.
  • The deduction is limited to interest on the first $750,000 of mortgage debt for loans taken out after December 15, 2017 (married filing jointly).
  • You must own the home and be legally liable for the debt to claim the deduction.
  • Itemizing deductions is only worthwhile if your total itemized deductions exceed the standard deduction for your filing status.

When you can claim the mortgage interest deduction

You can claim the deduction only if you meet three conditions: you must own the home, you must be legally liable for the mortgage debt, and you must itemize deductions instead of taking the standard deduction.

Ownership means your name is on the deed. If you are buying a home and the seller is financing part of it directly, you can deduct interest on that seller-financed portion. If you are married and file jointly, both spouses do not need to be on the deed, but at least one must be.

Legal liability means you are responsible for repaying the loan. If you co-sign a mortgage but do not own the property, you cannot deduct the interest. If you own the home but someone else holds the mortgage and you are not liable, you cannot deduct it either.

Itemizing deductions means adding up all your deductible expenses — mortgage interest, state and local taxes (capped at $10,000), charitable donations, medical expenses above a threshold, and others — and subtracting that total from your income. You only do this if the total exceeds the standard deduction. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. If your itemized deductions do not exceed these amounts, you are better off taking the standard deduction and cannot claim the mortgage interest deduction.

How to calculate the interest portion of your mortgage payment

Your mortgage servicer sends you a statement each year showing how much of your payments went to interest and how much went to principal. This document is called a Form 1098 (Mortgage Interest Statement), and it arrives by January 31 each year. The form shows the total interest you paid during the year in Box 1.

If you did not receive a Form 1098 or it is incorrect, you can calculate the interest yourself. Early in the loan, most of each payment is interest; later, most is principal. A mortgage amortization schedule — available from your lender or through online calculators — breaks down each payment into interest and principal. Add up the interest column for the year.

If you paid off the mortgage partway through the year, you deduct only the interest paid before payoff. If you took out the mortgage partway through the year, you deduct only the interest paid after closing. The Form 1098 reflects these partial-year amounts automatically.

Itemizing versus taking the standard deduction

Whether the mortgage interest deduction saves you money depends on whether itemizing is worth it. If your mortgage interest alone is $15,000 and you have no other deductible expenses, itemizing makes sense only if you are married filing jointly (standard deduction $29,200) and have at least $14,200 in other deductions to reach that threshold. If you are single, you would need $14,600 in other deductions.

Common deductions that stack with mortgage interest are state and local taxes (up to $10,000 combined), charitable donations, and medical expenses above 7.5 percent of your adjusted gross income. Many homeowners find that mortgage interest plus state and local taxes alone exceed the standard deduction, making itemizing worthwhile.

If you are in a low-tax state, have a small mortgage, and give little to charity, the standard deduction may be larger. In that case, you take the standard deduction and cannot claim the mortgage interest deduction. This is one reason the deduction benefits higher-income homeowners more — they tend to have larger mortgages and higher state and local taxes.

How the deduction affects your tax bill

The deduction reduces your taxable income, not your tax bill directly. If you deduct $10,000 in mortgage interest and you are in the 22 percent tax bracket, your tax bill drops by $2,200. If you are in the 24 percent bracket, it drops by $2,400. The higher your tax bracket, the more the deduction is worth.

The deduction does not reduce your tax bill dollar-for-dollar. It reduces the income that gets taxed. This is why a $10,000 deduction is worth $2,200 to someone in the 22 percent bracket but worth $3,700 to someone in the 37 percent bracket.

Mortgages that do not may have access to for the deduction

Home equity loans and lines of credit (HELOCs) taken out after December 15, 2017 do not may have access to for the interest deduction unless the money was used to buy, build, or substantially improve the home. If you borrowed $50,000 against your home equity to pay off credit cards or buy a car, that interest is not deductible. If you borrowed $50,000 to add a room or renovate the kitchen, that interest is deductible up to the $750,000 cap.

Loans on second homes, vacation homes, and rental properties can may have access to, but the rules are more complex. Interest on a second home mortgage is deductible up to the same $750,000 cap combined with your primary residence. Interest on a rental property is deductible as a business expense, not as a personal itemized deduction.

Frequently Asked Questions

Do I have to itemize to deduct mortgage interest?

Yes. You can claim the mortgage interest deduction only if you itemize deductions on Schedule A of your tax return. If you take the standard deduction, you cannot claim the mortgage interest deduction. You should itemize only if your total itemized deductions exceed the standard deduction for your filing status.

Can I deduct mortgage interest if I am paying off my loan early?

Yes, you deduct the interest you actually paid during the tax year. If you paid off the mortgage in June, you deduct only the interest paid from January through June. Your Form 1098 will show the correct amount.

What if I did not receive a Form 1098?

Contact your mortgage servicer and request a copy. If the servicer does not send one, you can calculate the interest yourself using your mortgage statement or amortization schedule. Keep records of your payments in case the IRS asks.

Can I deduct interest on a home equity line of credit?

Only if the borrowed money was used to buy, build, or substantially improve your home. If you used a HELOC to pay off credit card debt or for other purposes, that interest is not deductible.

Does the mortgage interest deduction explore to second homes?

Yes, but the $750,000 cap applies to the combined total of your primary residence and second home mortgages. If you have a $600,000 mortgage on your primary home and a $200,000 mortgage on a vacation home, you can deduct interest on both because the combined total is $800,000, but only $750,000 qualifies.