Mortgage Interest Deduction
As a homeowner, this deduction can be a real game-changer—here's what counts and how to claim it.
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What's the Mortgage Interest Deduction?
Curious about the nuts and bolts? It starts with qualified loans for your home. The Mortgage Interest Deduction lets you deduct the interest you paid on home loans from your taxable income. For homeowners juggling a big mortgage, this can be a real game-changer.
Here's the catch: This is an itemized deduction. That means you can only claim it if you skip the standard deduction and itemize instead. With the standard deduction at $14,600 for singles and $29,200 for married couples in 2024, your mortgage interest (plus other itemized deductions) needs to beat those numbers to make it worthwhile.
Think of it this way: You're paying interest anyway—might as well get a tax break for it. But whether it actually saves you money depends on your total itemized deductions compared to the standard deduction.
Quick Math Check
If you paid $15,000 in mortgage interest this year but have no other significant itemized deductions, and you're single with a $14,600 standard deduction? Itemizing saves you maybe $400 extra. Worth it, but not massive. If you're married and only paid $20,000 in mortgage interest? The standard deduction ($29,200) probably beats it. Run the numbers.
The $750K Limit Explained
Here's where loan timing matters. When you took out your mortgage determines your deduction limit.
The Tax Cuts and Jobs Act of 2017 changed the rules. If you bought your home after December 15, 2017, you're under the new, lower limit. If you bought before? You're grandfathered in at the old, higher limit. Here's the breakdown:
Newer Loans (After Dec 15, 2017)
Debt limit for deductible interest
Most new homeowners fall here. If your loan is above $750K, you can only deduct interest on the first $750K.
Older Loans (Before Dec 16, 2017)
Debt limit for deductible interest
You're grandfathered in! This higher limit stays with you even if you refinance (as long as you don't increase the principal).
Key Things to Know
Limits cover all your homes combined. Have two mortgages? The $750K (or $1M) is your total across both properties.
Refinancing? You stay under your original limit as long as you don't borrow more than the remaining balance when you refinance.
Up to two homes. Your main residence plus one vacation or second home. You can switch which property is your "second home" each year, but keep good records—IRS audits aren't fun surprises.
What Counts as "Qualified"?
Not all homes and loans make the cut. Here's what works—and what doesn't.
The loan must be "secured" by your home (meaning the house is collateral), and it must be used to buy, build, or substantially improve that property. Here's how it shakes out:
These Qualify
- ✓Purchase of main home or second home
- ✓Construction of a new home
- ✓Substantial improvements (new roof, addition, kitchen remodel)
- ✓Refinancing (if used for qualified purposes)
- ✓Single-family homes, condos, townhouses, mobile homes, houseboats
These Don't
- ✗Personal expenses (vacations, cars, wedding)
- ✗Business investments
- ✗Stock market investments
- ✗College tuition or student loans
- ✗Debt consolidation (unless for home improvements)
Home Equity Loans: The 2018 Rule Change
This is where it gets tricky. The rules changed dramatically in 2018, catching a lot of homeowners off guard.
Before 2018, you could deduct interest on home equity loans used for pretty much anything—consolidating credit cards, buying a car, whatever. Not anymore. Starting in 2018, the rules got way more restrictive.
The New Rule (Simple Version)
Interest on home equity debt is only deductible if the loan is used to buy, build, or substantially improve the home that secures the loan. That's it. No exceptions.
Say you take out a $50,000 home equity loan to remodel your kitchen—that interest is deductible. But using it for a vacation? Nope, that won't fly come tax time. The IRS wants to see that the money went into the home itself.
✓ Deductible Examples
- • New bathroom addition
- • Roof replacement
- • HVAC system upgrade
- • Deck or patio construction
✗ Not Deductible Examples
- • Paying off credit cards
- • Buying a car
- • Funding a wedding
- • Paying college tuition
How to Actually Claim It
Ready to claim this deduction? Here's your step-by-step roadmap.
Grab Your Form 1098
Your mortgage lender should send you Form 1098 (Mortgage Interest Statement) by early February. It shows exactly how much interest you paid during the year. Check your mail or your lender's online portal.
Missing it? Call your lender. They're required to send it if you paid $600+ in interest.
Verify It's Worth Itemizing
Add up all your potential itemized deductions: mortgage interest, state/local taxes (capped at $10K), charitable donations, medical expenses over 7.5% of income. Does it beat the standard deduction? If yes, itemize. If no, stick with standard.
Tax software (TurboTax, H&R Block) does this comparison automatically. It'll tell you which way saves more money.
File Schedule A
If you're itemizing, complete Schedule A (Itemized Deductions) with your Form 1040. Enter your mortgage interest on line 8a. Keep your Form 1098 and loan documents for at least three years in case of audit.
Real-World Example: The Johnsons
Meet the Johnsons—a married couple who bought a $500,000 home in 2022 with a 20% down payment ($400,000 mortgage). Let's see how the mortgage interest deduction plays out for them:
The Johnsons' Tax Year
Their Situation
• Mortgage: $400,000 @ 6.5% interest
• Interest paid in 2024: $25,800
• State/local taxes: $10,000 (SALT cap)
• Charitable donations: $3,500
• Filing: Married jointly
• Combined income: $180,000
The Math
Mortgage interest:$25,800
State/local taxes:+ $10,000
Charitable donations:+ $3,500
Total itemized deductions:$39,300
Standard deduction (married):$29,200
Extra tax savings from itemizing:$10,100
The Bottom Line
By itemizing, the Johnsons reduce their taxable income by an extra $10,100 compared to taking the standard deduction. At their 24% tax bracket, that's roughly $2,424 saved. Not bad for filing the right form.
Why They Qualify
Their $400K mortgage is well under the $750K limit. They bought after 2017, so they're under the new rules. The loan was used to purchase their main home. Their Form 1098 shows the interest paid. And their total itemized deductions ($39,300) beat the standard deduction by a healthy margin. All boxes checked.