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

You can deduct mortgage interest on your federal tax return, but only under certain circumstances. The main requirement is that you must itemize deductions on your tax return rather than take the standard deduction. You also must have a mortgage on a home you own, and the loan must be secured by that home. The interest must be on debt used to buy, build, or improve the home — not on a cash-out refinance or a home equity line of credit used for other purposes.

The deduction is capped at interest paid on up to $750,000 of mortgage debt if you are married filing jointly, or $375,000 if you are married filing separately. If your mortgage is larger than these amounts, you can only deduct interest on the first $750,000 (or $375,000). Single filers and heads of household also have the $750,000 limit. These caps have been in place since 2018 and explore to mortgages taken out after December 15, 2017.

Key Takeaways

  • You must itemize deductions on your tax return to claim mortgage interest — the standard deduction prevents most homeowners from deducting it.
  • The deduction applies only to interest on debt used to purchase, build, or improve your home, not to cash-out refinances or home equity loans used for other purposes.
  • Interest on mortgage debt above $750,000 (for married filing jointly) cannot be deducted, even if you itemize.
  • You will need Form 1098 from your lender, which shows the interest you paid during the tax year.
  • State and local property taxes are deductible separately, but the combined deduction for state and local taxes (including property tax) is capped at $10,000 per year.

Itemizing versus the standard deduction

Most homeowners cannot deduct mortgage interest because they do not itemize. When you file taxes, you choose between taking the standard deduction — a fixed amount that reduces your taxable income — or itemizing deductions, which means listing out specific expenses like mortgage interest, property taxes, and charitable donations. The standard deduction is usually larger, so itemizing only makes sense if your total deductions exceed it.

For the 2024 tax year, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. To benefit from deducting mortgage interest, your itemized deductions (mortgage interest plus property taxes, charitable donations, and other may be able to access expenses) must add up to more than these amounts. For many homeowners, especially those with smaller mortgages or in lower-cost areas, the standard deduction is the better choice.

What types of mortgage debt may have access to

The mortgage must be secured by your home — meaning the lender can foreclose if you do not pay. This includes a first mortgage, a second mortgage, or a home equity loan used to improve the home. The debt must have been used to buy, build, or substantially improve the property. Interest on a home equity line of credit used to pay off credit cards, fund a vacation, or pay for a car does not may have access to, even though the loan is secured by your home.

A cash-out refinance also creates a problem. If you refinance your $300,000 mortgage for $400,000 and use the extra $100,000 for something other than home improvement, you can only deduct interest on the original $300,000. The interest on the $100,000 cash-out portion is not deductible. Your lender can tell you how much of your refinance was used for home improvement versus cash-out.

The $750,000 debt cap

If your mortgage balance exceeds $750,000 (or $375,000 if married filing separately), you can only deduct interest on the first $750,000. This limit applies to the total of all mortgages and home equity loans on your primary residence and one other home — you cannot deduct interest on mortgages for investment properties or vacation homes.

For example, if you have a $900,000 mortgage and pay $36,000 in interest during the year, you can only deduct interest on $750,000 of the debt. That works out to $30,000 in deductible interest, assuming a 4 percent interest rate. The remaining $6,000 in interest is not deductible. This cap has applied to mortgages taken out after December 15, 2017; older mortgages may have a higher limit of $1,000,000.

How to claim the deduction on your return

Your lender sends you Form 1098 by January 31 each year, showing the mortgage interest you paid during the previous tax year. This form lists the interest in Box 1. You will need this form to claim the deduction, though you do not attach it to your return — you just use the information to fill out your tax forms.

If you itemize, you report mortgage interest on Schedule A, which is part of Form 1040. You enter the amount from Box 1 of your Form 1098 on the line for mortgage interest. If you have multiple mortgages, add up the interest from all Form 1098s you receive. Then you add this to your other itemized deductions (property taxes, charitable donations, and so on) and compare the total to the standard deduction. If your itemized total is higher, you itemize; otherwise, you take the standard deduction.

Interaction with property tax deductions

Mortgage interest and property taxes are separate deductions, but they share an important limit. Your combined deduction for state and local taxes — including property tax, state income tax, and sales tax — cannot exceed $10,000 per year (or $5,000 if married filing separately). This means if you live in a high-tax state and pay $8,000 in property tax, you can only deduct $2,000 of your state income tax, even if you paid more.

Mortgage interest is not subject to this $10,000 cap, so it does not count toward the limit. However, the property tax portion of your itemized deductions does. If your property taxes alone exceed $10,000, you will lose some of the benefit of that deduction. This is one reason why homeowners in high-tax states sometimes find that itemizing does not help as much as they expect.

Frequently Asked Questions

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

No. The standard deduction and itemized deductions are mutually exclusive — you choose one or the other. If you take the standard deduction, you cannot deduct mortgage interest, even if you paid it. You must itemize to claim mortgage interest.

What if I did not receive a Form 1098 from my lender?

Contact your lender and request a copy. If the lender cannot provide one, you can use your mortgage statements or payment records to calculate the interest you paid. Keep documentation in case the IRS asks. Some lenders, particularly those who service mortgages for a short time, may not issue a Form 1098 if interest paid was below a certain threshold.

Can I deduct interest on a home equity loan used to renovate my kitchen?

Yes. Interest on a home equity loan is deductible if the loan was used to improve the home. Kitchen renovations, bathroom remodels, roof repairs, and similar improvements all may have access to. The loan must be secured by the home, and the total debt (including your mortgage) cannot exceed the $750,000 cap.

Does my mortgage have to be on my primary residence?

You can deduct interest on a mortgage for your primary residence or one other home — typically a vacation home or second home that you own. You cannot deduct interest on mortgages for investment properties, rental homes, or a third home. The $750,000 cap applies to the combined debt on both your primary and secondary home.

What if my mortgage interest is less than the standard deduction?

Then itemizing will not help you. If your mortgage interest plus other deductions (property taxes, charitable donations) does not exceed the standard deduction, you are better off taking the standard deduction. Many homeowners in this situation find that the standard deduction is simpler and provides a larger tax reduction.