Quick Answer
Yes, mortgage interest is tax deductible on loans up to $750,000 in principal balance for homes purchased after December 15, 2017. For older mortgages, the limit is $1 million. You must itemize deductions to claim it, and it applies to both primary and secondary homes combined.
Best Answer
Michelle Woodard, Tax Policy Analyst
Homeowners with mortgages near or above the $750,000 deduction limit
How the mortgage interest deduction works
Yes, mortgage interest is deductible, but there's a cap. For homes purchased after December 15, 2017, you can deduct interest on mortgage debt up to $750,000 ($375,000 if married filing separately). This limit applies to your combined primary and secondary home mortgages.
The $750,000 limit in practice
If you have an $800,000 mortgage at 7% interest, you'll pay about $56,000 in interest the first year. However, only the interest on $750,000 of that debt ($52,500) is deductible. You lose the deduction on the remaining $50,000 in debt, costing you about $770 in lost tax benefits if you're in the 22% bracket.
Calculation example:
Primary vs. secondary home mortgages
The $750,000 limit applies to the combined debt on your primary residence and one secondary home. If you have a $600,000 mortgage on your primary home and a $300,000 mortgage on a vacation home, only $150,000 of the vacation home mortgage interest is deductible ($750,000 - $600,000 = $150,000 remaining limit).
Grandfathered mortgages: the $1 million rule
If you took out your mortgage before December 16, 2017, you're grandfathered under the old $1 million limit ($500,000 if married filing separately). This applies even if you refinance, as long as the new loan doesn't exceed the original balance.
Home equity debt rules
Home equity loans and HELOCs are only deductible if you use the money to "buy, build, or substantially improve" your home. Using a HELOC to pay off credit cards or buy a car makes the interest non-deductible, regardless of the loan amount.
Mortgage interest deduction limits by scenario
Points and loan origination fees
Mortgage points are prepaid interest and generally deductible in the year you pay them if you itemize. Each point equals 1% of your loan amount. On a $500,000 mortgage, 2 points costs $10,000 and provides a $10,000 deduction (potentially saving $2,200 in the 22% tax bracket).
What you should do
1. Calculate your deduction limit — multiply your mortgage balance by the applicable percentage if over $750,000
2. Track all mortgage interest — your lender will send Form 1098 showing deductible interest paid
3. Consider itemizing — you need total itemized deductions over $15,000 (single) or $30,000 (married) to benefit
4. Plan refinancing carefully — refinancing a grandfathered mortgage could reduce your deduction limit
Use our refund estimator to calculate exactly how much the mortgage interest deduction will save you based on your income and other deductions.
Key takeaway: Mortgage interest is deductible up to $750,000 in loan balance for newer mortgages, potentially saving $11,550 annually on a maxed-out mortgage in the 22% tax bracket.
*Sources: [IRS Publication 936](https://www.irs.gov/pub/irs-pdf/p936.pdf) - Home Mortgage Interest Deduction, [Tax Cuts and Jobs Act of 2017](https://www.congress.gov/bill/115th-congress/house-bill/1) - Section 11043*
Key Takeaway: Mortgage interest is deductible up to $750,000 in loan balance for newer mortgages, potentially saving $11,550 annually on a maxed-out mortgage in the 22% tax bracket.
Mortgage interest deduction limits by mortgage type and date
| Mortgage Type | Purchase Date | Deduction Limit | Notes |
|---|---|---|---|
| Primary residence | Before 12/16/17 | $1,000,000 | Grandfathered |
| Primary residence | After 12/15/17 | $750,000 | Current law |
| Primary + secondary | Before 12/16/17 | $1,000,000 combined | Grandfathered |
| Primary + secondary | After 12/15/17 | $750,000 combined | Current law |
| Home equity debt | Any date | Within above limits | Only if used for home improvements |
More Perspectives
Robert Kim, Tax Return Analyst
New homeowners trying to understand if and how to claim the mortgage interest deduction
Understanding your first mortgage interest deduction
As a first-time buyer, your mortgage interest is almost certainly fully deductible since most first homes cost well under the $750,000 debt limit. The key question is whether itemizing deductions makes sense for you.
Your first year: maximum interest deduction
Mortgage interest is highest in the early years of your loan due to amortization. On a $300,000, 30-year mortgage at 7%, you'll pay about $20,800 in interest the first year — all deductible. In the 22% tax bracket, that's $4,576 in tax savings.
Should you itemize?
To claim mortgage interest, you must itemize instead of taking the standard deduction ($15,000 single, $30,000 married in 2026). Add up:
If your total exceeds the standard deduction, itemize. Many first-time buyers find itemizing saves them $2,000-5,000 in taxes.
Don't forget your Form 1098
Your mortgage lender will send Form 1098-Mortgage Interest Statement by January 31. This shows your deductible interest paid. If you paid points at closing, those appear here too and are generally deductible in full the first year.
Key takeaway: First-time buyers typically get the full mortgage interest deduction, and combined with property taxes, it usually makes itemizing worthwhile in the early years of homeownership.
Key Takeaway: First-time buyers typically get the full mortgage interest deduction, and combined with property taxes, it usually makes itemizing worthwhile in the early years of homeownership.
Michelle Woodard, Tax Policy Analyst
Homeowners evaluating how refinancing might affect their mortgage interest deduction
How refinancing affects your mortgage interest deduction
Refinancing generally doesn't change your ability to deduct mortgage interest, but there are important nuances depending on when you got your original mortgage.
Grandfathered mortgage protection
If your original mortgage was taken out before December 16, 2017, you benefit from the higher $1 million deduction limit. When you refinance, you keep this grandfathered status as long as the new loan amount doesn't exceed the remaining balance on your old mortgage.
Example: You had a $900,000 mortgage from 2015 with a current balance of $850,000. You can refinance up to $850,000 and maintain the $1 million limit. But if you cash out $50,000 for renovations (new loan = $900,000), the extra $50,000 falls under the new $750,000 limit rules.
Cash-out refinancing complications
Cash-out refinancing can affect your deduction:
Refinancing costs and points
Points paid to refinance are not immediately deductible like purchase points. Instead, you must amortize them over the loan term. On a 30-year refinance with $6,000 in points, you deduct $200 per year ($6,000 ÷ 30).
However, if you refinance again or sell the home, you can deduct any remaining unamortized points in that year.
Timing considerations
Refinancing early in the tax year maximizes your current-year interest deduction from the new, potentially lower rate. Refinancing in December means you get almost a full year of the old, higher rate.
Key takeaway: Refinancing usually preserves your mortgage interest deduction, but grandfathered mortgages should avoid increasing the loan balance to maintain the higher $1 million deduction limit.
Key Takeaway: Refinancing usually preserves your mortgage interest deduction, but grandfathered mortgages should avoid increasing the loan balance to maintain the higher $1 million deduction limit.
Sources
- IRS Publication 936 — Home Mortgage Interest Deduction
- Tax Cuts and Jobs Act of 2017 — Section 11043 - Mortgage Interest Deduction Changes
Related Questions
Reviewed by Michelle Woodard, Tax Policy Analyst 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.