For many homeowners, the mortgage interest deduction is one of the most valuable tax breaks. However, this deduction is subject to strict limits based on when the mortgage was taken out and how much was borrowed. In this 2025–2026 guide, we explain the current rules, deduction caps, and how to maximize your tax benefit.
🏠 What Is the Mortgage Interest Deduction?
The mortgage interest deduction allows taxpayers who itemize deductions on Schedule A (Form 1040) to deduct interest paid on loans used to buy, build, or improve a qualified home. This includes primary residences and, in some cases, second homes.
📅 Key Rules for 2025 & 2026
The Tax Cuts and Jobs Act (TCJA) made significant changes to the deduction rules, which remain in effect through at least the 2025 tax year:
- 🏡 Mortgages taken out before December 15, 2017:
- Interest deductible on up to $1,000,000 of mortgage debt ($500,000 if married filing separately)
- 🏡 Mortgages taken out on or after December 15, 2017:
- Interest deductible on up to $750,000 of mortgage debt ($375,000 if married filing separately)
- 📆 These limits apply to 2025 and 2026 unless Congress changes the law or extends TCJA provisions
🛠️ What Counts as Qualified Mortgage Interest?
The following types of interest may qualify:
- Interest on loans used to buy, build, or substantially improve a main or second home
- Interest on home equity loans or HELOCs only if the funds are used for home improvements
- Points paid at closing (may be deductible over the life of the loan or all at once if certain criteria are met)
Note: Interest on personal loans, most HELOCs used for personal expenses, or rental property mortgages (claimed separately on Schedule E) is not deductible under this rule.
📉 Deduction Phaseouts and Limitations
- Only the interest on the first $750,000 or $1 million (based on loan date) is deductible
- Excess interest on balances above those limits cannot be deducted
- Second home interest is deductible as long as the combined mortgage debt does not exceed the applicable cap
📋 How to Claim the Mortgage Interest Deduction
- Obtain Form 1098 (Mortgage Interest Statement) from your lender
- Itemize deductions using Schedule A on your Form 1040
- Enter mortgage interest on Line 8 of Schedule A
- Include eligible points and mortgage insurance premiums if applicable
💵 Example Scenarios
🔹 Example 1: Mortgage from 2015
- Original loan: $950,000
- Interest on entire amount is deductible
🔹 Example 2: Mortgage from 2019
- Loan amount: $900,000
- Only the interest on the first $750,000 is deductible
- You must prorate the deduction accordingly
📑 Mortgage Insurance Premium Deduction
The deduction for private mortgage insurance (PMI) expired at the end of 2021. As of now, it is not available for 2025 and 2026, unless reinstated by Congress.
🏘️ Can I Deduct Interest on a Second Home?
Yes. Interest on a second home is deductible if:
- The home is used by you or your family for at least part of the year
- You do not rent it out for more than 14 days annually without personal use
- The total combined mortgage debt on both homes remains under the applicable $750,000/$1 million cap
🧾 What About Refinanced Mortgages?
Interest from a refinanced mortgage remains deductible up to the original principal limit, and the new loan must be used to improve or maintain the home to qualify. If you cash out and use the proceeds for non-home purposes (e.g., pay off credit cards), that portion of interest is not deductible.
📊 Standard Deduction vs. Itemizing
For 2025, the standard deduction is:
- $14,000 – Single
- $28,000 – Married Filing Jointly
- $20,800 – Head of Household
You’ll benefit from the mortgage interest deduction only if your total itemized deductions (including property taxes, charitable donations, medical expenses, etc.) exceed these amounts.
🔍 People Also Ask (FAQs)
Q: Is mortgage interest still deductible in 2025?
A: Yes, if you itemize your deductions. Interest limits apply based on when the loan originated and how much you borrowed.
Q: Can I deduct mortgage interest on a rental property?
A: No. Rental property interest is deducted on Schedule E, not Schedule A, and is not subject to the mortgage interest limits discussed here.
Q: Is there a limit to how many homes I can deduct mortgage interest on?
A: You can deduct mortgage interest on up to two homes (main and one second home), subject to debt caps.
Q: What if I co-own a home with someone else?
A: Each co-owner may deduct their share of the interest, provided they are legally liable for the loan and pay the interest themselves.
📘 Final Thoughts
The mortgage interest deduction can offer major savings—but only if you itemize and stay within the limits. With the standard deduction remaining high, it’s important to evaluate annually whether itemizing makes sense for your situation. If you’re planning a home purchase, refinance, or second home investment, knowing the deduction rules can improve your long-term tax strategy.
Need help maximizing your home-related deductions? Consult with a tax advisor or use software that supports itemized filing to ensure you’re making the most of the mortgage interest deduction for 2025 and 2026.
