Mortgage Interest Deduction: How Much You Can Deduct and the Limits

The Short Answer

For 2026, you can deduct interest on up to $750,000 of mortgage debt ($375,000 if married filing separately) if you took out the loan after December 15, 2017. If your mortgage originated on or before that date, you’re grandfathered into the older, higher limit: $1 million ($500,000 if married filing separately). Either way, you can only claim this deduction if you itemize on Schedule A instead of taking the standard deduction, according to IRS Publication 936.

That’s the whole rule in a nutshell. The rest of this article covers why the limit exists, which loans qualify, and whether itemizing actually saves you money.

Why This Cap Exists

Before 2018, homeowners could deduct interest on up to $1 million of mortgage debt used to buy, build, or substantially improve a home, plus interest on up to $100,000 of home equity debt used for almost anything. The Tax Cuts and Jobs Act (TCJA), passed in December 2017, lowered the acquisition-debt cap to $750,000 and eliminated the separate home equity deduction unless the loan proceeds go toward the home itself.

Congress’s reasoning, as described in TCJA’s legislative history, was straightforward: the mortgage interest deduction disproportionately benefited higher-income households with large loans, and reducing the cap helped offset the cost of doubling the standard deduction. That near-doubled standard deduction is the other half of this story — it’s why far fewer households itemize today than did before 2018.

The $750,000 cap was originally scheduled to expire after 2025, which would have reverted the limit back to $1 million for everyone starting in 2026. The One Big Beautiful Bill Act (P.L. 119-21), signed July 4, 2025, made the TCJA limit permanent rather than merely extending it, so the $750,000/$375,000 figures are the operative numbers for 2026 and beyond. The same law also permanently excludes home equity debt from qualified residence interest unless the proceeds are used to buy, build, or substantially improve the home securing the loan. Because tax law can shift, confirm the current-year limit on IRS.gov or in the latest version of Publication 936 before you file.

Two Caps, Depending on When You Borrowed

The limit you’re subject to depends entirely on your mortgage’s origination date — not when you bought the home, remodeled it, or refinanced for the same balance.

A few wrinkles worth knowing:

• Refinancing a grandfathered loan. If you refinance a pre-December-16, 2017 mortgage, you generally keep the $1 million grandfathered limit — but only up to the original loan balance at the time of refinancing. Cash-out refinancing above that original balance falls under the new $750,000 rule for the additional amount, per IRS guidance.
• Binding contracts before the cutoff. If you entered into a written binding contract before December 15, 2017 to close on the purchase of a principal residence before January 1, 2018, and you actually purchased that residence before April 1, 2018, the IRS treats your loan as if it originated on or before December 15, 2017.
• Combined debt on multiple homes. The limit applies to your total mortgage debt across your main home and one second home combined — not $750,000 per property.

What Actually Counts as Deductible Interest

Not every dollar labeled “mortgage interest” on your Form 1098 is automatically deductible. The TCJA tied the deduction to how the loan proceeds were used.

Acquisition debt

This is money borrowed to buy, build, or substantially improve your main home or a second home. This is the core category the $750,000/$1,000,000 limits apply to.

Home equity loans and HELOCs

Interest on a home equity loan or home equity line of credit is only deductible if the funds were used to buy, build, or substantially improve the home that secures the loan. A HELOC used to pay off credit cards, fund a vacation, or cover tuition does not qualify, even though it’s secured by your house, according to IRS Publication 936. If you used a HELOC to add a bedroom or replace a roof, that portion counts toward your acquisition-debt limit.

Points

Points (prepaid interest) paid to get a better rate on your primary home purchase are usually fully deductible in the year paid, subject to specific IRS tests (the loan must be secured by your main home, points must be a common practice in your area, and the amount can’t exceed what’s typically charged). Points on refinances are usually deducted gradually over the life of the loan instead.

Mortgage insurance premiums

The mortgage insurance premium deduction lapsed after the 2021 tax year, but it is back for 2026. Section 70108 of the One Big Beautiful Bill Act (P.L. 119-21, signed July 4, 2025) permanently treats qualifying mortgage insurance premiums — PMI on conventional loans, FHA mortgage insurance premiums, VA funding fees, and USDA guarantee fees — as qualified residence interest, effective for tax years beginning after December 31, 2025. That means premiums paid in 2026 are deductible on the return you file in 2027, they count within the same $750,000 limit, and they are subject to an income phase-out that begins at $100,000 of modified AGI ($50,000 if married filing separately). Premiums paid in 2025 and earlier are still not deductible.

Itemizing vs. the Standard Deduction: Do You Even Benefit?

This is the part people often skip, and it matters more than the cap itself for most households. You only benefit from the mortgage interest deduction if your total itemized deductions — mortgage interest, state and local taxes (capped at $40,400 for 2026), charitable gifts, and a few others — exceed your standard deduction.

For 2026, the standard deduction is $16,100 for single filers and married filing separately, $32,200 for married couples filing jointly, and $24,150 for heads of household, per IRS Revenue Procedure 2025-32. (For 2025 the figures were $15,750, $31,500, and $23,625 — the One Big Beautiful Bill Act raised them above the amounts the IRS had originally published.)

Here’s why this matters: a married couple with a $300,000 mortgage at a 6.5% rate pays roughly $19,500 in interest in the first year. Add $10,000 in state and local taxes and you’re at $29,500 — still below the $32,200 joint standard deduction for 2026. In that case, itemizing wouldn’t help at all, and the mortgage interest deduction would effectively be worth $0 to them, limit or no limit.

Households most likely to benefit from itemizing are those with larger mortgages, high state income or property taxes, or sizable charitable giving — often concentrated in higher-cost metro areas.

A Worked Example

Say you’re single, you bought a home in 2023 with a $900,000 mortgage, and you paid $52,000 in mortgage interest in 2026 according to your Form 1098.

1. Your loan originated after December 15, 2017, so your cap is $750,000, not $900,000.
2. Divide the limit by your actual balance: $750,000 ÷ $900,000 = 0.833.
3. Multiply that ratio by your total interest paid: $52,000 × 0.8333 ≈ $43,333.

That $43,333 is roughly what you can claim as deductible mortgage interest on Schedule A — not the full $52,000 you actually paid. The remaining interest, attributable to the $150,000 above the cap, isn’t deductible. IRS Publication 936 includes worksheets to help you do this averaging-balance calculation precisely if your loan balance changed during the year.

How to Claim the Deduction

1. Get Form 1098 from your mortgage servicer, typically issued by January 31 for the prior tax year, showing total interest paid.
2. Determine if your total loan balance exceeds your applicable cap ($750,000 or $1,000,000, depending on origination date). If it does, calculate the deductible portion using the IRS worksheet in Publication 936.
3. Add up your other itemizable deductions — state and local taxes (SALT, capped at $40,400 for 2026, phasing down for modified AGI above $505,000), charitable contributions, and qualifying medical expenses above 7.5% of adjusted gross income.
4. Compare the total to your standard deduction. Only itemize on Schedule A if your itemized total is higher.
5. File Schedule A with Form 1040 and keep your Form 1098 and loan documents in case the IRS asks for substantiation.

Frequently Asked Questions

Does the mortgage interest deduction limit apply per person or per household?

The $750,000 and $1 million caps apply per return, not per person. A married couple filing jointly shares one limit, not two. That’s also why the married-filing-separately figures ($375,000 and $500,000) are exactly half — each spouse claims their own share of a single combined limit.

Can I deduct mortgage interest on a vacation home or rental property?

A second home used personally (not primarily rented out) can qualify, and its debt counts toward the same $750,000 or $1 million combined cap as your main home. Rental property mortgage interest is handled differently — it’s deducted as a business expense on Schedule E, not Schedule A, and isn’t subject to these same personal-itemized-deduction limits.

What happens if I refinance a mortgage that was under the old $1 million limit?

You generally keep the $1 million grandfathered cap, but only up to your original loan balance at the time you refinance. If you refinance for more than that original balance (a cash-out refinance), the extra amount is treated as new debt subject to the $750,000 limit, per IRS guidance in Publication 936.

Sources

• IRS.gov, Publication 936, “Home Mortgage Interest Deduction”
• IRS.gov, Topic No. 505, “Interest Expense”
• IRS.gov, Schedule A (Form 1040) and Instructions
• IRS.gov, “IRS provides tax inflation adjustments” (annual Revenue Procedure announcements)

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