Mortgage Interest Deduction: How It Works and Who Can Claim It

As a homeowner, you might be wondering: Is mortgage interest deductible? The short answer is yes—but only if specific IRS rules are met and you itemize your deductions (versus taking the standard deduction). 

Before you file taxes, it helps to learn how the mortgage interest deduction works, what the mortgage interest deduction limit is, and what other mortgage costs are deductible. That way, you can determine whether itemizing your deductions is the most cost-effective move for you. 

Here, we’ll break down the mortgage interest deduction, the eligibility requirements, and how to calculate your estimated deduction amount.

Can you deduct mortgage interest on your taxes?

Mortgage interest is tax-deductible, but not for everyone. You may qualify for this tax deduction if: 

• You’re a homeowner whose loan is secured by a “qualified” home
• You (and your lender) have every intention of paying off that loan
• You itemize deductions using Schedule A

Note that a qualified home can be either your primary residence or a second home. Eligible properties include houses, boats, mobile homes, condominiums, co-ops, and house trailers. Your home must also have cooking, sleeping, and toilet facilities. 

If you take out a home equity loan (HEL) or home equity line of credit (HELOC), you could also qualify for the mortgage interest deduction if: 

• You use those funds for home improvements 
• The loan is secured by your main or second home
• You meet any additional requirements outlined by the IRS

You may also be able to claim at least a partial mortgage interest deduction in certain specific situations, too. For example, when: 

• You’re charged a late payment fee (as long as it’s not for a separate service). 
• You’re charged a prepayment penalty for paying off your loan early (in some cases). 
• You receive a nontaxable housing allowance from the ministry or the military. 
• You take out a mortgage to buy out your ex-spouse’s share of the home in a divorce. 
• You pay prepaid interest in the form of “points” (these can be deducted over the life of the loan or all at once, depending on eligibility). 

Note: The Tax Cuts and Jobs Act (TCJA) of 2017 reduced mortgage interest deduction limits. If you purchased a home on or before December 15, 2017, you can deduct interest paid on the first $1 million of your mortgage debt ($500,000 if married filing separately). If you bought a home after that date, the limit is $750,000 ($375,000 if married filing separately).

How does the mortgage interest deduction work?

If you’re interested in taking the mortgage interest deduction, here’s how to go about it: 

1. Look for Form 1098: If you paid at least $600 in mortgage interest, your mortgage lender should send you Form 1098 (mortgage interest statement). This form shows how much interest you paid during the previous year. If you recently purchased a home, it also includes any deductible points. 
2. Enter mortgage interest paid: Use Schedule A (to attach to Form 1040 or Form 1040-SR) to figure out your itemized deductions. You can include home mortgage interest, points, and some other expenses (like charitable gifts or medical expenses). 
3. Compare the itemized vs. the standard deduction: The standard deduction is a specific amount based on factors like your age and filing status. Itemizing lets you add up all eligible expenses to reduce your taxable income. If your total itemized deduction is higher than the standard deduction, itemizing could save you money on taxes. 
4. Keep clear records: It never hurts to keep good records—just in case the IRS ever asks for them or you need to reference something from the past. Keep a copy of Form 1098, your closing statement if you refinanced your home, and any other documents related to your mortgage expenses. 

TurboTax can help automatically determine whether itemizing is the right move for you. All you need is to provide some basic information about your tax situation. We’ll use that to compare the standard vs. itemized deductions and get you the best tax outcome possible.

How much mortgage interest can you deduct?

So, how much mortgage interest is deductible? It depends on when you first obtained your loan: 

• Loans taken out on or after December 16, 2017: Interest is deductible on mortgage debt up to $750,000. 
• Loans taken out before December 16, 2017: Interest is deductible on mortgage debt up to $1 million. 
• Exception to the rule: If you entered into a legally binding mortgage contract before December 15, 2017, with the intent to close by January 1, 2018, the deduction limit is $1 million. For this to happen, you must also have closed on that home by April 1, 2018. 

Mortgage interest deduction limits are split for single filers or if married filing separately. The limit applies to your combined mortgage debt (which includes your main and second homes). 

Here’s an example. 

Say you purchased a home in 2017 (before the cutoff date), took out a $900,000 mortgage, and paid $30,000 in interest in 2024. Because your entire $900,000 mortgage is below the limit, 100% of the $30,000 interest is deductible. 

If you were to take out that same mortgage in 2018, you’d only be able to deduct interest on the first $750,000. This means you could deduct interest on only 83.33% of your loan. 

Note: Many provisions in the TCJA of 2017 are set to expire at the end of 2025, unless the law is extended or replaced. This means the mortgage interest deduction limit could revert to the $1 million limit that was in place before the law changed.

Why is my mortgage interest no longer deductible?

Even if you previously qualified for the mortgage interest deduction, your eligibility can change from year to year. Here are some common reasons why your mortgage interest may no longer be tax deductible: 

• Instead of itemizing, you took the standard deduction (which may be higher than the itemized deduction). 
• You took out a home equity loan or HELOC for reasons other than home improvements. 
• You no longer own the property or didn’t pay mortgage interest last year. 
• You’ve turned your second home into a rental property (rental properties don’t qualify for the mortgage interest deduction). However, if you rent out the home, you may still deduct mortgage interest as a rental expense under Schedule E. 
• Your home no longer counts under the IRS definition of “qualified home.” 
• Your income exceeds the thresholds for certain itemized deductions (potentially applicable starting in 2026 if Congress doesn’t extend the TJCA rules).

Should you itemize mortgage interest or take the standard deduction?

When you file taxes, you can take either the itemized or standard deduction—but not both. Each option can lower your taxable income, but one might be better for you than the other. 

Most people go with the standard deduction, but not everyone is eligible. For example, nonresidents don’t qualify for this deduction. For married couples filing separately, if one spouse itemizes their deductions, the other spouse must do the same. However, for some people, itemizing is the better choice since it can (in some cases) provide a bigger tax break. 

If you’re trying to decide whether to itemize, add up your mortgage interest, property taxes, medical expenses, and charitable donations for the year. If your total deductible expenses are higher than the standard deduction, itemizing could reduce your taxable income further—potentially reducing your overall tax bill. 

TurboTax does the math for you, comparing both options to determine whether the itemized or standard deduction makes more sense. And we won’t stop with the mortgage interest deduction. We’ll also factor in other eligible deductions to help you get the biggest tax break possible.

What mortgage costs are tax deductible?

Mortgage interest isn’t the only thing that’s tax deductible. Other common deductible expenses include: 

• Mortgage points (if paid upfront): Points paid upfront are considered prepaid interest, making them deductible. However, unless you meet specific criteria, you must deduct them gradually over the life of the loan rather than all at once. . 
• Property taxes: You may be able to deduct up to $10,000 ($5,000 if married filing separately) in state or local property taxes. 
• Distressed property losses or expenses: If you’ve experienced losses from a federally declared disaster, you may qualify for a deduction. 

Not all home-related expenses are tax deductible. Nondeductible expenses include: 

• Homeowners insurance 
• Private mortgage insurance (PMI) 
• Title insurance 
• Extra principal payments 
• Closing costs 
• HOA fees or condominium association fees 
• Depreciation 
• Home repairs (unless financed through a HELOC or home equity loan)

How to calculate your mortgage interest deduction

Thinking about itemizing this year? It might be worth it—especially if your mortgage interest, medical bills, property taxes, and other deductions add up to more than the standard deduction. 

Itemizing takes a little extra work but could mean a lower taxable income and bigger tax savings. 

Let TurboTax do the math for you. Figuring out how much mortgage interest you can deduct doesn’t have to be complicated. Just enter some info into our standard vs. itemized deduction calculator, and we’ll crunch the numbers for you.

We’ll help you: 

• See if itemizing beats the standard deduction. 
• Find out how much mortgage interest you can deduct. 
• Get every tax break you qualify for—big and small.