Mortgage interest is tax deductible if you itemize deductions and meet specific conditions

Yes, you can deduct mortgage interest on your federal tax return — but only if you itemize deductions instead of taking the standard deduction, and only if the loan is secured by your home. The interest must be on a mortgage used to buy, build, or improve your primary residence or a second home. Interest on a home equity line of credit (HELOC) or cash-out refinance may also may have access to, though the rules changed after 2017.

The catch is that most homeowners no longer benefit from this deduction. The standard deduction — the flat amount you can deduct without itemizing — nearly doubled in 2018 and remains high. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. Unless your mortgage interest plus other deductible expenses (property taxes, state income taxes, charitable donations, medical expenses) exceed those amounts, you will save more money by taking the standard deduction and skipping the mortgage interest deduction entirely.

Key Takeaways

  • Mortgage interest is deductible only if you itemize deductions on Schedule A, and only if the loan is secured by your primary home or a second home.
  • The standard deduction is now so high that most homeowners save more money by not itemizing, even though they could deduct mortgage interest.
  • Interest on loans over $750,000 (or $375,000 if married filing separately) is not deductible, a limit set in 2017.
  • Interest on a HELOC or cash-out refinance is deductible only if the money was used to substantially improve the home, not for other purposes.
  • You will need Form 1098 from your lender, which reports the interest you paid in the previous year.

When the standard deduction makes itemizing pointless

The IRS lets you choose: take the standard deduction (a flat amount based on your filing status) or itemize deductions (add up all your deductible expenses). You cannot do both. Most people come out ahead with the standard deduction because it is now larger than the total of their deductible expenses.

Itemizing makes sense only if your mortgage interest, property taxes, state and local income taxes, charitable donations, and medical expenses add up to more than the standard deduction. For example, if you are married filing jointly, your standard deduction is $29,200. If your mortgage interest is $8,000, your property taxes are $6,000, and your charitable donations are $4,000, your total is $18,000 — still below the standard deduction. You would claim the standard deduction and get no tax benefit from the mortgage interest.

However, if you live in a high-tax state, own an expensive home with a large mortgage, or give substantially to charity, your itemized deductions might exceed the standard deduction. In that case, itemizing — and deducting the mortgage interest — saves you money.

The $750,000 loan limit and how it works

The Tax Cuts and Jobs Act of 2017 capped the mortgage interest deduction. You can deduct interest only on the first $750,000 of mortgage debt if you are married filing jointly, or $375,000 if you are married filing separately or single. This limit applies to loans taken out after December 15, 2017.

If you took out a mortgage before that date, the old limit of $1,000,000 still applies to you — the cap does not retroactively reduce your deduction. But if you refinanced after December 15, 2017, the new $750,000 limit applies to the refinanced loan.

The limit is per person, not per home. If you own two homes and have mortgages on both, the total debt across both homes cannot exceed $750,000 for you to deduct all the interest. If your total debt is $850,000, you can deduct interest only on $750,000 of it.

Home equity lines of credit and cash-out refinances

Interest on a HELOC or a cash-out refinance is deductible only if the borrowed money was used to substantially improve the home itself. If you took out a HELOC to pay for a new roof, kitchen remodel, or addition, the interest qualifies. If you used the HELOC to pay off credit cards, buy a car, or pay for a vacation, the interest does not may have access to — it is treated as personal interest, which is never deductible.

The IRS looks at what you did with the money, not the type of loan. A cash-out refinance that pulls $50,000 from your home equity is deductible interest only if you can show that $50,000 went toward home improvement. Keep receipts and invoices from contractors, suppliers, and inspectors to prove how you spent the money.

If you used part of the money for home improvement and part for other purposes, only the portion used for improvement generates deductible interest. You will need to track and document the split.

How to claim the deduction on your tax return

To deduct mortgage interest, you must file Form 1040 (the main individual income tax form) and attach Schedule A, which is where you list itemized deductions. You cannot claim mortgage interest if you file Form 1040-EZ or take the standard deduction.

Your lender sends you Form 1098 (Mortgage Interest Statement) by January 31 each year. This form shows the total interest you paid in the previous year. You report this amount on Schedule A, line 8. You will also list other deductible expenses — property taxes, state and local income taxes (capped at $10,000 total), charitable donations, and medical expenses — and add them up.

If your total itemized deductions exceed the standard deduction, you file Schedule A with your return. If they do not, you straightforward take the standard deduction and do not file Schedule A at all. Either way, you do not need to do anything special to "claim" the deduction — you just report the numbers on the correct form.

Loans that do not may have access to for the deduction

Mortgage interest is deductible only on loans secured by your primary home or a second home. A loan on a third home, investment property, or rental property does not may have access to for this deduction (though rental property owners may be able to deduct mortgage interest as a business expense on Schedule E).

Interest on a home equity loan or HELOC used for purposes other than home improvement — such as paying off credit card debt, funding a business, or paying for education — is not deductible. The IRS changed this rule in 2018, and it remains in effect.

Interest on a loan from a family member or private lender is deductible only if the loan is properly documented and the interest rate is at least the IRS minimum (called the Applicable Federal Rate, or AFR). If you lend money to a family member at no interest or below-market interest, neither of you can deduct or report interest on the loan.

State and local tax implications

Some states allow you to deduct mortgage interest on your state income tax return even if you do not itemize on your federal return. A few states — including New York and Illinois — have their own mortgage interest deduction rules that differ from federal rules. Check your state's tax authority website or speak with a tax professional to understand what applies to you.

If you live in a state with no income tax (such as Florida, Texas, or Washington), state tax deductions do not explore to you, but federal deductions still do.

When to talk to a tax professional

If your mortgage is straightforward — a single loan on your primary home, no HELOC, and you are unsure whether to itemize — you can often figure this out yourself using tax software or a straightforward spreadsheet. Add up your mortgage interest, property taxes, state income taxes, and charitable donations. If the total exceeds the standard deduction, itemize. If not, take the standard deduction.

Talk to a tax professional if you own multiple homes, have a HELOC or cash-out refinance, are near the $750,000 loan limit, or live in a state with its own mortgage interest rules. A professional can model both scenarios (itemizing versus standard deduction) and tell you which saves more money in your specific situation.

Frequently Asked Questions

Can I deduct mortgage interest if I take the standard deduction?

No. You must itemize deductions on Schedule A to claim mortgage interest. If you take the standard deduction, you cannot also itemize, so you get no tax benefit from mortgage interest. Most homeowners come out ahead with the standard deduction because it is now larger than their total deductible expenses.

What if I paid off my mortgage early — can I deduct the interest I paid?

Yes. You deduct the interest you actually paid in the tax year, regardless of when the loan was taken out or paid off. Your Form 1098 will show the interest paid in that year. If you paid off the loan partway through the year, the form reflects only the interest paid before payoff.

Is interest on a home equity loan deductible if I used it to pay off credit card debt?

No. The interest is deductible only if the borrowed money was used to substantially improve the home. If you used a HELOC or home equity loan to pay off credit cards, medical bills, or other debts, the interest is not deductible. The IRS looks at what you did with the money, not the type of loan.

Do I need to keep receipts to prove my mortgage interest?

You do not need receipts for the mortgage interest itself — your Form 1098 from the lender is your proof. However, if you have a HELOC or cash-out refinance and want to deduct the interest, you should keep receipts and invoices showing that the money was used for home improvement. The IRS may ask for this documentation if you are audited.

What is the Applicable Federal Rate, and why does it matter for family loans?

The Applicable Federal Rate (AFR) is the minimum interest rate the IRS sets each month for loans between family members. If you lend money to a relative at no interest or below the AFR, the IRS may treat it as a gift, and neither party can deduct interest. Check the IRS website for the current AFR before making a family loan if you want the interest to be deductible.