Did you know that the mortgage interest deduction (MID) limit could change after 2025? If Congress doesn’t act, the deduction cap may revert to $1 million from the current $750,000 limit under the Tax Cuts and Jobs Act (TCJA). This could significantly impact whether you should itemize deductions or take the standard deduction.
Understanding mortgage interest deduction limits can help you maximize your tax savings when filing your 2025 taxes. In this article, learn how the deduction works, who qualifies, and how much you can deduct.
Can You Deduct Mortgage Interest on Your Taxes?
Yes, but only if you meet IRS qualifications. The mortgage interest tax deduction allows you to deduct the interest you paid on a home loan for your main home or second home, as long as your mortgage is secured by the property. This deduction can help reduce your taxable income, but you must itemize deductions instead of opting for the standard deduction, which was nearly doubled by the Tax Cuts and Jobs Act (TCJA) of 2017.
Who Qualifies for the Mortgage Interest Deduction?
To qualify for the deduction, you must meet these IRS requirements:
You have a secured mortgage. Your home mortgage interest is deductible only if the mortgage is secured by your main home or a second home. If your loan is unsecured, you can’t deduct the interest.
The home qualifies as a residence. Your property must be a house, condo, co-op, mobile home, houseboat, or similar dwelling with sleeping, cooking, and toilet facilities.
You itemize deductions. If your total deductions (including mortgage interest and points) don’t exceed the standard deduction—which is $27,700 for married couples filing jointly and $13,850 for single filers in 2024—itemizing won’t benefit you.
You are legally responsible for the mortgage. You must be listed as a borrower on the loan. If you co-signed but don’t own the home, you can’t deduct the interest.
Which Types of Mortgage Interest Are Deductible?
You can deduct interest on:
Primary and secondary home mortgages – You may deduct interest on mortgage debt up to $750,000 ($375,000 if married filing separately). If your mortgage was taken before Dec. 15, 2017, you can deduct interest on the first $1 million of mortgage principal.
Home equity loans (HELs) and home equity lines of credit (HELOCs) – The interest on home equity loans is deductible only if you use the loan to substantially improve the home securing the loan. If you use the funds for personal expenses (e.g., vacations, credit card debt), the interest is not deductible.
Refinanced mortgage loans – You can deduct the interest on a refinanced mortgage, but only up to the balance of the old mortgage. If you cash out more than what you originally owed, the interest on that portion is not deductible unless the funds are used for home improvements.
Mortgage points – If you paid discount points when you bought a home, you can deduct the cost over the life of the mortgage—or all at once if you meet IRS criteria.
You can’t deduct interest on:
- Mortgage insurance premiums (unless Congress reinstates this deduction).
- Loans secured by rental or investment properties (these are deducted under rental income rules).
- Home equity loans used for non-home expenses (like buying a car or paying off student loans).
Further Reading: Learn the difference between loan principal and interest in mortgages
How Does the Mortgage Interest Deduction Work?
Step-by-Step Guide to Claiming the Mortgage Interest Deduction
Check Form 1098 – Your mortgage lender sends you Form 1098 by January, showing the amount of interest you paid. If you paid at least $600 in mortgage interest last year, you should receive this form.
Enter the interest paid on Schedule A – Use Schedule A on Form 1040 to report your deductible mortgage interest.
Compare with the standard deduction – If your total deductions (including interest on a mortgage, property taxes, and medical expenses) don’t exceed the standard deduction, you should opt for the standard deduction instead.
Itemized Deduction vs. Standard Deduction: Which Is Better?
- Standard deduction: A fixed deduction ($27,700 for married couples, $13,850 for single filers in 2024).
- Itemized deduction: Your total deductible expenses, including home mortgage interest deduction, property taxes, and medical expenses.
Example: If you paid in mortgage interest $12,000 and property taxes of $6,000, your total itemized deductions would be $18,000. Since this is lower than the standard deduction of $27,700, you’d be better off taking the standard deduction.
Further Reading: Maximize homeowner tax savings
What Are the Limits for Mortgage Interest Deduction in 2025?
Current Limits (Through 2025)
Your mortgage deduction is limited based on when you took out the loan:
- Mortgages after Dec. 15, 2017: You can deduct interest on mortgage debt up to $750,000 ($375,000 if married filing separately).
- Mortgages before Dec. 15, 2017: You can deduct interest on the first $1 million of mortgage debt ($500,000 if married filing separately).
- Home equity debt: Interest on home equity loans is only deductible if you use the funds to substantially improve the home.
What Happens After 2025?
- If Congress does not extend the TCJA provisions, the limit will revert to $1 million for new mortgages.
- The standard deduction will decrease, making itemizing deductions more beneficial for many homeowners.
What this means for you: If you have a large mortgage, you might benefit from a higher deduction after 2025, but this depends on whether lawmakers renew the current tax rules.
Why Is My Mortgage Interest No Longer Deductible?
If you used to deduct mortgage interest but can’t anymore, here’s why:
You took the standard deduction. Since the TCJA nearly doubled the standard deduction, many taxpayers no longer benefit from itemizing mortgage interest payments.
Your loan is not secured by a qualified home. If your mortgage is a secured debt, meaning it’s tied to your home, you can deduct interest. If it’s unsecured, you can’t deduct the interest.
You exceeded the mortgage deduction limits. If your amount of mortgage is over $750,000, you can only deduct interest up to that limit.
Your home equity loan was not used for home improvements. Interest on home equity loans is deductible only if used to substantially improve the home. If you used it for personal expenses, the interest is not deductible.
You refinanced beyond your original loan balance. You can deduct interest only on the amount of your mortgage that was originally secured. If you took out extra cash, that portion isn’t deductible unless it was spent on home improvements.
Further Reading: Learn how to qualify for a homestead exemption
How to Maximize Your Mortgage Interest Deduction
Strategies to Lower Your Tax Bill
Pay January’s mortgage payment in December. This allows you to deduct an extra month of interest in the current tax year.
Refinance within IRS limits. Keep the amount of the mortgage within IRS deduction thresholds to avoid losing deductible interest.
Use home equity loans correctly. To deduct interest on home equity loans, the money must be used to substantially improve the home—not for personal expenses.
Bundle deductions. If your itemized deductions are close to the standard deduction, prepaying property taxes or making charitable contributions could push you past the threshold.
Tax Filing Tips for 2025
Track IRS rule changes. If the mortgage interest deduction limit increases after 2025, homeowners with larger loans may benefit more.
Consult a tax pro. If you bought a home, refinanced, or have a second home, a tax professional can help ensure you’re claiming all eligible deductions.
Mortgage interest can be deducted, but only if itemizing benefits you. Make sure to calculate your total deductions before deciding whether to claim the mortgage interest deduction or opt for the standard deduction.
Key Takeaways
- Mortgage interest is deductible only if you itemize and meet IRS qualifications.
- You can deduct interest on mortgages up to $750,000 ($1 million if purchased before 2017).
- Home equity loan interest is deductible only if used to substantially improve the home.
- TCJA provisions expire after 2025, potentially increasing the deduction limit to $1 million.
- Itemizing only makes sense if your total deductions exceed the standard deduction.
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