The mortgage interest deduction is one of the largest tax benefits available to American homeowners. It lets you deduct the interest paid on your home loan — potentially thousands of dollars per year — reducing your taxable income if you itemize your deductions.
In 2026, you can deduct interest on up to $750,000 of qualifying mortgage debt. But thanks to higher standard deductions, fewer homeowners benefit than before 2018.
What Is the Mortgage Interest Deduction?
The mortgage interest deduction (MID) is a federal income tax deduction available to homeowners who:
- Itemize deductions on Schedule A (rather than taking the standard deduction)
- Have a qualifying mortgage secured by their primary or secondary home
- The debt does not exceed the $750,000 limit (for mortgages after December 15, 2017)
You claim the deduction using IRS Form 1040, Schedule A. Your lender will send you a Form 1098 each January showing the total mortgage interest paid in the prior year.
2026 Mortgage Interest Deduction Rules
| Rule | 2026 |
|---|---|
| Debt limit (mortgages after Dec 15, 2017) | $750,000 |
| Debt limit (mortgages before Dec 16, 2017) | $1,000,000 |
| Filing status limit (MFS) | $375,000 |
| Eligible properties | Primary + one second home |
| Investment property | Not eligible (deduct on Schedule E instead) |
| Points deductible | Yes — home purchase points in year paid; refinance points amortised |
| Form required | Schedule A (Form 1040) |
| Lender statement | Form 1098 |
Standard Deduction vs. Itemizing in 2026
The 2026 standard deduction amounts are:
| Filing status | Standard deduction |
|---|---|
| Single | $15,000 |
| Married filing jointly | $30,000 |
| Head of household | $22,500 |
| 65 or older / blind (add) | +$1,550 per condition |
The critical question: Do your itemized deductions exceed your standard deduction?
The biggest itemized deductions are:
- Mortgage interest
- Property taxes (capped at $10,000 combined SALT limit)
- Charitable contributions
- State and local income taxes (subject to $10,000 SALT cap)
For many homeowners, especially those with smaller mortgages or in low-tax states, the standard deduction exceeds itemized deductions — making the mortgage interest deduction effectively worthless for them.
Who Benefits Most?
High mortgage balance + high tax bracket = biggest benefit:
| Mortgage balance | Rate | Year 1 interest | Tax savings (32% bracket) | Tax savings (22% bracket) |
|---|---|---|---|---|
| $750,000 | 7.0% | ~$52,300 | ~$16,736 | ~$11,506 |
| $500,000 | 7.0% | ~$34,900 | ~$11,168 | ~$7,678 |
| $300,000 | 7.0% | ~$20,900 | ~$6,688 | ~$4,598 |
| $200,000 | 7.0% | ~$13,900 | ~$4,448 | ~$3,058 |
Assumes all interest is deductible and taxpayer itemises.
Worked Example: Does Itemizing Help?
Alex and Jordan, married filing jointly, 24% tax bracket:
- Mortgage on $450,000 home: $360,000 at 6.9%
- Year 1 mortgage interest: ~$24,600
- Property taxes: $6,000
- State income tax: $4,000 (SALT cap doesn’t bind)
- Charitable contributions: $2,000
- Total itemized deductions: $36,600
- Standard deduction: $30,000
- Extra deduction from itemizing: $6,600
- Tax savings from itemizing: $6,600 × 24% = $1,584/year
Alex and Jordan save $1,584 in taxes by itemizing — worthwhile, but not the massive windfall often assumed.
What if their mortgage were $200,000?
- Year 1 mortgage interest: ~$13,700
- Property taxes: $4,000
- State income tax: $4,000
- Charitable: $2,000
- Total itemized: $23,700 — below the $30,000 standard deduction
- Benefit from itemizing: $0 — take the standard deduction
What Qualifies as a “Qualifying Mortgage”?
To qualify for the mortgage interest deduction, the loan must:
- Be secured by your home (the home is collateral)
- Be used to buy, build, or substantially improve the qualifying home (for post-2017 loans)
- Cover your primary residence or one second home
Qualifying debt types:
- Purchase mortgage
- Home construction loan
- Home improvement loan (secured by the property)
- Mortgage refinance (on the original principal amount — not cash taken out beyond original balance unless used for improvements)
HELOC and home equity loan interest: Deductible only if the funds were used to buy, build, or substantially improve the home securing the loan. Interest on HELOCs used for other purposes (paying off credit cards, vacations, etc.) is no longer deductible after the 2017 tax law change.
Points Paid at Closing
Discount points paid when you take out a mortgage to buy your home are generally fully deductible in the year paid, provided:
- The points are a percentage of the loan amount
- Paying points is a normal practice in your area
- You paid the points out of pocket (not rolled into the loan)
Refinance points must be deducted over the life of the loan — you can’t deduct them all in year one.
How to Claim the Mortgage Interest Deduction
- Receive Form 1098 from your lender (mailed by January 31)
- Complete Schedule A (Itemized Deductions)
- Enter mortgage interest from Form 1098 on Line 8a of Schedule A
- Complete the rest of Schedule A and compare total to your standard deduction
- Attach Schedule A to Form 1040 and choose itemizing if total exceeds standard deduction
If you have multiple mortgages, you’ll receive multiple Form 1098s. Enter the total interest from all qualifying mortgages, subject to the $750,000 debt limit.
State Tax Deductions
Many states follow federal rules and allow a state mortgage interest deduction. However, some states:
- Have their own dollar caps
- Don’t allow the deduction at all
- Have different rules for the SALT cap
Check your state’s tax rules — the federal deduction is just the starting point.
Internal Links
- Property tax deduction guide
- Should I itemize or take the standard deduction?
- How to remove PMI from your mortgage
- Mortgage preapproval guide
- Homeownership guide
Bottom Line
The mortgage interest deduction can save homeowners hundreds to thousands of dollars in taxes annually — but only if you itemize and your total deductions exceed the standard deduction. In 2026, with standard deductions at $15,000 (single) and $30,000 (married), many middle-income homeowners with smaller mortgages find the standard deduction is larger. The MID delivers the most value to high-income owners with large mortgages in the 32%–37% tax brackets.
This article is for educational purposes only and does not constitute personalised tax advice. Consult a tax professional for advice specific to your situation.
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