Mortgage interest is deductible only if you itemize, and only on loans under $750,000
You can deduct mortgage interest on your federal tax return, but only if two things are true: you must itemize deductions instead of taking the standard deduction, and your total mortgage debt must not exceed $750,000 (or $1 million if you were married filing jointly and took out the loan before December 16, 2017). Most homeowners do not meet both conditions, which is why most homeowners get no tax benefit from mortgage interest at all.
The deduction applies only to interest you paid, not to principal. If your monthly payment is $1,500 and $900 of that goes to interest, you can deduct only the $900 portion — and only if itemizing makes sense for your situation. The interest portion shrinks every year as you pay down the loan, so the deduction gets smaller over time.
Key Takeaways
- Mortgage interest is deductible only if your total mortgage debt is $750,000 or less and you choose to itemize deductions on your tax return.
- The standard deduction for 2024 is $14,600 for single filers and $29,200 for married couples filing jointly, so itemizing must save you more than that to be worth doing.
- Your mortgage lender sends Form 1098 in January showing how much interest you paid that year, which you use to calculate the deduction.
- Interest on a home equity loan or line of credit is deductible only if the borrowed money was used to buy, build, or improve the home itself.
- State and local taxes (including property tax) are capped at $10,000 per year when combined, which limits how much total deduction you can claim even if you itemize.
When itemizing makes sense versus taking the standard deduction
The IRS lets you choose between two paths: take the standard deduction (a flat amount based on your filing status) or itemize (add up all your deductible expenses and claim that total instead). You pick whichever is larger. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly.
If you paid $8,000 in mortgage interest last year but have no other deductible expenses, itemizing gives you an $8,000 deduction — which is less than the standard deduction of $14,600. You would take the standard deduction instead and get no benefit from the mortgage interest. But if you paid $8,000 in mortgage interest, $5,000 in property taxes, and $3,000 in charitable donations, your itemized total would be $16,000, which exceeds the standard deduction. In that case, itemizing saves you money.
The mortgage interest deduction is most valuable in the first few years of a 30-year loan, when interest makes up the largest share of your monthly payment. After 15 or 20 years, the interest portion shrinks, and the deduction becomes smaller.
The $750,000 mortgage debt limit
The deduction applies only to mortgage debt of $750,000 or less. If you have two mortgages on the same home, or a mortgage and a home equity loan, the total of all loans secured by your home cannot exceed $750,000. Any interest paid on debt above that threshold is not deductible.
The limit was $1 million for loans taken out before December 16, 2017. If you refinanced after that date, the new loan falls under the $750,000 cap. If you took out the original loan before the cutoff and have not refinanced since, the $1 million limit may still explore to you — check with a tax professional if this affects your situation.
For example, if you have a $600,000 mortgage and a $200,000 home equity loan, your total debt is $800,000. You can deduct interest only on the first $750,000 of that debt. The interest on the remaining $50,000 is not deductible.
How to find the exact amount of interest you paid
Your mortgage lender sends you Form 1098 (Mortgage Interest Statement) by January 31 each year. This form shows the total mortgage interest you paid during that year. You use this number to calculate your deduction.
The form also shows property taxes paid (if your lender collected them from your escrow account) and mortgage insurance premiums. Keep this form with your tax records. If you do not receive it by early February, contact your lender to request a copy or ask them to send it electronically.
If you paid off your mortgage during the year, the Form 1098 shows only the interest paid up to the payoff date. If you took out a new mortgage partway through the year, you will receive a 1098 from each lender showing their portion of the year's interest.
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 primary mortgage interest — but only if the borrowed money was used to buy, build, or substantially improve the home. If you borrowed $50,000 against your home's equity to pay off credit card debt or buy a car, that interest is not deductible.
The total of all loans secured by your home (including the primary mortgage, second mortgage, home equity loan, and HELOC) still cannot exceed $750,000 for the interest to be deductible. If you have a $600,000 mortgage and a $200,000 HELOC used for home improvements, your total is $800,000, and only the interest on the first $750,000 is deductible.
State and local tax limits affect your total deduction
Even if you itemize, your deduction for state and local taxes (SALT) is capped at $10,000 per year. This cap includes property tax, state income tax, and local income tax combined. In high-tax states, this limit can prevent you from itemizing even if your mortgage interest plus property tax would otherwise exceed the standard deduction.
For example, if you live in a state with high property taxes and paid $8,000 in mortgage interest and $6,000 in property tax, your SALT deduction is capped at $10,000 total. Your itemized deduction would be $8,000 (mortgage interest) plus $10,000 (SALT cap) = $18,000. If the standard deduction is $14,600, itemizing still makes sense. But if your property tax alone is $10,000, you cannot add any of it to your deduction, and your itemized total would be only the $8,000 in mortgage interest.
What to do if you refinance or pay off your mortgage
If you refinance your mortgage, the new loan is treated as a separate debt for the $750,000 limit. The interest you pay on the refinanced loan is deductible the same way as the original loan. You will receive a new Form 1098 from the new lender showing the interest paid on the refinanced amount.
If you pay off your mortgage early, you stop earning the deduction once the loan is paid in full. The interest you paid before payoff remains deductible for that tax year, but future years have no mortgage interest to deduct. This is one reason some people choose to keep a mortgage even after they could afford to pay it off — the tax deduction has value to them.
Frequently Asked Questions
Can I deduct mortgage interest if I do not itemize?
No. The mortgage interest deduction is available only if you choose to itemize deductions instead of taking the standard deduction. If the standard deduction is larger than your itemized total, you take the standard deduction and receive no benefit from mortgage interest.
What if I paid points when I took out my mortgage?
Points (prepaid interest) are deductible, but the rules depend on whether you paid them upfront or rolled them into the loan. Points paid upfront on a purchase are deductible over the life of the loan. Points on a refinance must be deducted over the life of the new loan, not all at once. Your lender will report this on Form 1098.
Do I need to report the mortgage interest deduction separately on my tax return?
If you itemize, you report mortgage interest on Schedule A (Itemized Deductions), which you attach to your Form 1040. You list the amount from Form 1098 along with your other deductible expenses. If you use tax software, it walks you through this step.
Can I deduct interest on a mortgage for a rental property or investment property?
Yes, but it is reported differently. Rental property mortgage interest is deducted on Schedule E (Rental Income and Loss), not Schedule A. The $750,000 limit applies only to mortgages on your primary residence or second home, not investment properties.
What happens to my deduction if I get divorced?
If you refinance after a divorce and your ex-spouse's name is removed from the loan, only the new loan amount (up to $750,000) qualifies for the deduction. If the original loan was taken out before December 16, 2017, and you did not refinance, the $1 million limit may still explore to you personally. Consult a tax professional about your specific situation.