Quick Answer
You can deduct mortgage interest on up to $750,000 in mortgage debt ($375,000 if married filing separately). For a $400,000 mortgage at 7% interest, that's about $28,000 deductible in year one — but only if you itemize and your total itemized deductions exceed the $30,000 standard deduction for married couples.
Best Answer
Robert Kim, CPA
Best for homeowners with significant mortgage interest and other itemized deductions
How much mortgage interest you can deduct
You can deduct all mortgage interest paid on up to $750,000 in qualifying mortgage debt ($375,000 if married filing separately). This limit applies to the combined total of your first mortgage and any second mortgages or home equity loans used to buy, build, or substantially improve your home.
For most homeowners, the mortgage interest deduction is their largest itemized deduction. However, you can only benefit from it if your total itemized deductions exceed the standard deduction.
Example: $500,000 mortgage interest deduction
Let's say you bought a home in 2026 with a $500,000 mortgage at 7.25% interest:
If your total itemized deductions are $42,000 ($36,250 mortgage interest + $3,000 state taxes + $2,750 charitable donations), you'd save about $2,640 in federal taxes (22% bracket) compared to taking the standard deduction.
Qualifying mortgage debt breakdown
Key factors that affect your deduction
What you should do
1. Add up all itemized deductions to see if they exceed your standard deduction
2. Keep Form 1098 from your lender showing interest paid
3. Track home improvement expenses if you have home equity debt
4. Consider timing other deductions to maximize itemizing benefits
Use our return scanner to identify if you're missing other deductions that could push you over the standard deduction threshold.
Key takeaway: Mortgage interest on up to $750,000 in debt is fully deductible, but only helps if your total itemized deductions exceed the $30,000 standard deduction (married) or $15,000 (single).
*Sources: [IRS Publication 936](https://www.irs.gov/pub/irs-pdf/p936.pdf), IRC Section 163(h)*
Key Takeaway: Mortgage interest on up to $750,000 in qualifying debt is fully deductible, but only benefits you if itemizing beats the standard deduction.
Mortgage interest deduction by loan amount and filing status
| Mortgage Amount | Annual Interest (7%) | Deductible Interest | Non-deductible Interest |
|---|---|---|---|
| $300,000 | $21,000 | $21,000 | $0 |
| $500,000 | $35,000 | $35,000 | $0 |
| $750,000 | $52,500 | $52,500 | $0 |
| $1,000,000 | $70,000 | $52,500 | $17,500 |
More Perspectives
Robert Kim, CPA
Best for new homeowners trying to understand if the mortgage interest deduction will help them
Will the mortgage interest deduction help you as a first-time buyer?
As a first-time homebuyer, you might be disappointed to learn that the mortgage interest deduction may not provide the tax savings you expected. Due to the higher standard deduction enacted in 2018, many new homeowners find that itemizing doesn't beat taking the standard deduction.
Reality check: When mortgage interest doesn't help
Let's say you bought your first home with a $350,000 mortgage at 7% interest:
If you're in the 22% bracket, you'd save about $990 compared to the standard deduction — not the $5,390 you might have calculated by multiplying your full mortgage interest by your tax rate.
First-year homeowner considerations
Bottom line for new buyers
Don't buy more house than you can afford assuming the mortgage interest deduction will offset the cost. The tax benefit is often smaller than expected, especially in the first few years when you have fewer other itemized deductions.
Key takeaway: Many first-time homebuyers find the mortgage interest deduction provides less tax savings than expected due to the high standard deduction.
Key Takeaway: Many first-time homebuyers find the mortgage interest deduction provides less tax savings than expected due to the high standard deduction.
Michelle Woodard, JD
Best for homeowners with mortgages above the $750,000 deduction limit
Understanding the $750,000 limit on mortgage interest
If your mortgage exceeds $750,000, you can only deduct interest on the first $750,000 of debt. This limitation significantly affects homeowners in high-cost areas or those with expensive homes.
Example: $1 million mortgage limitation
Suppose you have a $1 million mortgage at 7% interest:
This means you're paying $17,500 annually in mortgage interest that provides no tax benefit.
Strategies for high-value homeowners
Home equity debt restructuring: If you have both a first mortgage and home equity loan totaling over $750,000, consider which debt carries higher interest rates.
Geographic considerations: The $750,000 limit doesn't adjust for cost of living. A modest home in San Francisco might hit this limit while a mansion in other areas might not.
Refinancing implications: When refinancing a mortgage above $750,000, the portion above the limit still won't be deductible, regardless of the new interest rate.
Planning around the limitation
Consider whether paying down the mortgage faster makes sense when a portion of the interest isn't deductible. The after-tax cost of non-deductible interest is the full interest rate, not reduced by your tax bracket.
Key takeaway: Homeowners with mortgages above $750,000 lose the tax benefit on interest for the excess amount, making those dollars more expensive than they appear.
Key Takeaway: Homeowners with mortgages above $750,000 lose the tax benefit on interest for the excess amount, making those dollars more expensive than they appear.
Sources
- IRS Publication 936 — Home Mortgage Interest Deduction
- IRC Section 163(h) — Interest deduction limitations
Related Questions
Reviewed by Robert Kim, CPA on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.