Home loan interest is deductible only if you itemize deductions and meet specific conditions

You can deduct mortgage interest on your federal tax return, but only if two things are true: you itemize deductions instead of taking the standard deduction, and your loan meets the IRS definition of a may have access to home loan. Most homeowners do not itemize anymore because the standard deduction is larger, so even though the interest is technically deductible, they do not benefit from it. If you do itemize, the interest on a mortgage up to $750,000 of principal is deductible; interest on anything above that is not.

The loan must be secured by your home — meaning the house itself is collateral if you stop paying. A home equity line of credit (HELOC) or second mortgage counts if the borrowed money was used to buy, build, or improve that same home. A cash-out refinance where you borrowed against your home's value to pay off credit cards or buy a car does not count; only the portion used for the home itself is deductible.

Key Takeaways

  • Mortgage interest is deductible only if you itemize deductions on Schedule A, and most taxpayers benefit more from the standard deduction.
  • Interest on up to $750,000 of home loan principal is deductible; interest above that limit is not.
  • The loan must be secured by your home and used to buy, build, or improve that home — not to pay off other debts.
  • You report mortgage interest on Form 1098 (sent by your lender) and carry it to Schedule A if you itemize.
  • State and local property taxes are also deductible if you itemize, but the combined total of property taxes and other state/local taxes is capped at $10,000 per year.

Itemizing versus the standard deduction

The standard deduction is a flat amount you can subtract from your income without listing any expenses. For 2024, it is $14,600 for single filers and $29,200 for married filing jointly. If your mortgage interest, property taxes, charitable donations, and other deductible expenses add up to more than the standard deduction, itemizing saves you money. If they add up to less, the standard deduction is better.

Many homeowners find that even with mortgage interest, their total deductions do not exceed the standard deduction — especially in the first years of a mortgage when property taxes and interest are the main deductible items. A mortgage calculator can show you how much interest you will pay in a given year, and you can add that to your estimated property taxes and any other deductions to see whether itemizing makes sense for you.

What counts as a may have access to home loan

A may have access to home loan is one where the home itself secures the debt. Your primary residence and one other home (a vacation home or rental property you live in part-time) both count. The loan can be a mortgage, a second mortgage, a HELOC, or a home equity loan.

The key rule is that the money must have been used to buy, build, or improve the home. If you took out a home equity loan and used the money to pay off credit card debt, buy a car, or fund a vacation, that interest is not deductible. If you took out a cash-out refinance and used part of the money to renovate your kitchen and part to pay off a car loan, only the interest on the portion used for the renovation is deductible — though in practice, lenders and the IRS treat the entire refinance as one loan, so you would deduct interest based on the ratio of home-improvement dollars to total borrowed dollars.

The $750,000 loan limit

The IRS caps the deductible mortgage interest at the amount you would owe on $750,000 of principal. If your mortgage is for $800,000, you can deduct interest only on $750,000 of it. This limit applies to loans taken out after December 15, 2017. Loans taken out before that date have a $1,000,000 limit.

The limit is per person, not per home. If you are married and file jointly, you and your spouse share one $750,000 limit combined. If you each own a home and file separately, each of you has a $750,000 limit, but the IRS discourages filing separately because it usually costs more in taxes overall.

How to report mortgage interest on your tax return

Your lender sends you a Form 1098 by January 31 each year, showing the mortgage interest you paid in the previous year. The form also shows property taxes paid through escrow and points paid on a refinance. You do not send the 1098 with your return, but you use the numbers from it to fill out Schedule A (Itemized Deductions).

On Schedule A, you list mortgage interest on line 8a. You also list property taxes on line 5a, but here is where the $10,000 cap comes in: the total of property taxes, state income taxes, and sales taxes cannot exceed $10,000 per year (or $5,000 if you are married filing separately). This cap is separate from the $750,000 mortgage limit. After you complete Schedule A, you carry the total itemized deductions to your main tax form (Form 1040) and compare it to the standard deduction. If Schedule A is larger, you itemize. If the standard deduction is larger, you use that instead and ignore Schedule A.

Points and refinances

When you take out a mortgage, you may pay points — an upfront fee equal to a percentage of the loan amount, usually 1 to 3 percent. One point equals 1 percent of the loan. Points are a form of prepaid interest and are deductible, but the rules depend on whether the loan is a purchase or a refinance.

On a purchase, you can deduct all the points in the year you pay them. On a refinance, you must spread the deduction over the life of the loan — if you paid $6,000 in points on a 30-year refinance, you deduct $200 per year. However, if you refinance again or pay off the loan early, you can deduct any remaining points in that year. Form 1098 shows points paid, and you report them on Schedule A line 8b.

Property taxes and the $10,000 state and local tax cap

Property taxes on your home are deductible if you itemize, but they are part of a combined cap. The total of property taxes, state income taxes, and state and local sales taxes cannot exceed $10,000 per year. This cap has been in place since 2018 and is set to expire after 2025 unless Congress extends it.

If you live in a high-tax state and pay $12,000 in property taxes alone, you can deduct only $10,000 of it (assuming you pay no state income or sales tax). If you pay $6,000 in property taxes and $5,000 in state income tax, you can deduct all $11,000 combined — no, wait: you can deduct $10,000 combined, so you would deduct $6,000 in property tax and $4,000 in state income tax, or any split that adds to $10,000. You choose how to allocate the cap to minimize your overall tax.

Frequently Asked Questions

Can I deduct mortgage interest if I take the standard deduction?

No. The standard deduction is a single number you subtract from your income; you do not list individual deductions. If you take the standard deduction, you cannot also deduct mortgage interest. You must itemize on Schedule A to claim mortgage interest, and you can only itemize if your total deductions exceed the standard deduction.

What if I paid off my mortgage early — can I deduct the remaining interest?

No. You deduct only the interest you actually paid in the tax year. If you pay off a 30-year mortgage in 10 years, you deduct interest only for those 10 years. You cannot deduct interest you would have paid in the remaining 20 years.

Is interest on a home equity loan deductible?

Yes, if the borrowed money was used to buy, build, or improve the home securing the loan. If you borrowed against your home's equity to pay off credit cards or buy a car, that interest is not deductible. The $750,000 limit applies to the combined balance of your mortgage and home equity loans.

Do I need to file Schedule A if my mortgage interest alone is less than the standard deduction?

Only if your total deductions — mortgage interest plus property taxes, charitable donations, and other deductible items — exceed the standard deduction. Add up everything you can deduct. If the total is higher than the standard deduction for your filing status, itemize. If it is lower, use the standard deduction.

What happens to the mortgage interest deduction after 2025?

The $750,000 loan limit and the $10,000 state and local tax cap are both set to expire after 2025 unless Congress extends them. Starting in 2026, the limit would revert to $1,000,000 and the state and local tax cap would disappear, but this is not certain. Watch for updates from the IRS or a tax professional closer to that date.