Mortgage interest is tax deductible only if you itemize deductions, and only the interest portion—not the principal or insurance

The mortgage interest deduction lets you subtract the interest you paid on a mortgage from your taxable income, but only under specific conditions. You must itemize deductions on your tax return instead of taking the standard deduction, your loan must be secured by your home, and the deduction applies only to interest, not to principal payments, property taxes, homeowners insurance, or HOA fees. The deduction also has a cap: as of 2024, you can deduct interest only on loans up to $750,000 of principal (or $1 million if you took out the mortgage before December 16, 2017).

Most homeowners do not benefit from this deduction. The standard deduction for 2024 is $14,600 for single filers and $29,200 for married couples filing jointly. You only save money by itemizing if your total itemized deductions—mortgage interest, state and local taxes, charitable donations, and medical expenses—exceed that threshold. For many people, especially those with smaller mortgages or lower interest rates, the standard deduction is larger.

Key Takeaways

  • You can only deduct mortgage interest if you itemize deductions on your tax return, which requires your total itemized deductions to exceed the standard deduction for your filing status.
  • The deduction applies only to interest paid on mortgages secured by your primary home or a second home, not to principal, insurance, property taxes, or HOA fees.
  • Interest on mortgage debt above $750,000 (or $1 million for mortgages taken before December 16, 2017) cannot be deducted.
  • You report mortgage interest on Schedule A of Form 1040, and your lender sends you a Form 1098 each January showing how much interest you paid the previous year.

How to know if itemizing saves you money

To decide whether to itemize, add up all your potential itemized deductions: mortgage interest, state and local taxes (capped at $10,000), charitable donations, and medical expenses above 7.5% of your adjusted gross income. If that total is higher than the standard deduction for your filing status, itemizing will lower your taxable income more than taking the standard deduction.

Use the IRS Form 1040 instructions or a tax software tool to run both scenarios. Many tax preparation programs calculate this automatically and show you which option results in a lower tax bill. If you are close to the threshold, even small additional deductions—a charitable donation or unreimbursed medical costs—can tip the balance toward itemizing.

Keep in mind that state and local tax deductions are capped at $10,000 total, which affects many homeowners in high-tax states. If you pay $8,000 in state income tax and $5,000 in property tax, you can only deduct $10,000 combined, not $13,000. This cap has made itemizing less valuable for many people since it took effect in 2018.

What counts as deductible mortgage interest

Only interest paid on a loan secured by your primary residence or a second home counts. The loan must be a mortgage, home equity line of credit (HELOC), or home equity loan. Interest on a cash-out refinance is deductible as long as the new loan is also secured by the home and does not exceed the cap.

Points paid to lower your interest rate are also deductible, but the rules depend on whether you paid them upfront or rolled them into the loan. Points paid at closing on a purchase are deductible in the year you pay them. Points paid on a refinance must be deducted over the life of the loan (usually 15 or 30 years), unless you refinance again, in which case you can deduct any remaining points in that year.

Interest on a home equity loan is deductible only if the borrowed money was used to buy, build, or improve the home. If you took out a HELOC to pay off credit card debt or buy a car, that interest is not deductible. The IRS distinguishes between loans used to improve the home (deductible) and loans used for other purposes (not deductible).

What does not count as a deduction

Principal payments—the amount that reduces your loan balance—are never deductible. Property taxes, homeowners insurance, HOA fees, and mortgage insurance premiums are also not deductible as mortgage deductions, though property taxes may be deductible as part of your state and local tax deduction (up to the $10,000 cap).

Mortgage insurance premiums (PMI) paid by borrowers with less than 20% down were temporarily deductible under rules that expired at the end of 2023. As of 2024, PMI is not deductible unless Congress extends the provision again. Check your tax software or a tax professional to confirm the current year's rules.

Interest on a rental property mortgage is handled differently: it is deductible as a business expense on Schedule E, not as a personal itemized deduction. The same applies to investment property. These deductions have different rules and limits.

How to report mortgage interest on your tax return

Your lender sends you a Form 1098 (Mortgage Interest Statement) by January 31 each year, showing the total interest you paid in the previous year. This form also lists any points you paid and property taxes withheld. Use the amount shown in Box 1 of the Form 1098 as your deductible interest.

If you itemize deductions, enter your mortgage interest on Schedule A (Itemized Deductions), which attaches to Form 1040. Line 8 of Schedule A is for mortgage interest paid to financial institutions. If you paid interest to an individual (rare, but possible in owner-financed deals), that goes on Line 9.

If you did not receive a Form 1098 or the amount seems wrong, contact your lender. Some lenders mail the form late, and some may have made an error. You can still deduct the correct amount even if you do not have the form, but having it makes the deduction easier to document if the IRS asks questions.

When refinancing affects your deduction

Refinancing does not change the deductibility of interest—you still deduct interest on the new loan if you itemize. However, refinancing can affect how much interest you pay overall and how much of it is deductible in each year.

If you refinance, the new lender will send you a Form 1098 for the interest paid on the new loan. If you paid off the old loan partway through the year, the original lender will also send a Form 1098 showing interest paid before the payoff. You deduct interest from both loans in the year you paid it.

Points paid on a refinance must be amortized (deducted gradually) over the life of the new loan, unless you refinance again. If you refinance a second time, you can deduct any remaining unamortized points from the previous refinance in the year of the new refinance. This rule often catches people off guard, so keep track of points paid on each refinance.

State and local tax deduction limits affect mortgage deductions

The $10,000 cap on state and local taxes (SALT) indirectly affects mortgage interest deductions because both are itemized deductions that compete for space in your deduction total. If you live in a high-tax state and already hit the $10,000 SALT cap with income and property taxes alone, adding mortgage interest may not increase your total itemized deductions enough to exceed the standard deduction.

For example, if you pay $8,000 in state income tax and $5,000 in property tax, you have already used your full $10,000 SALT allowance. Your mortgage interest would be added on top of that, but the $10,000 cap means you cannot deduct the property tax portion. This cap expires after 2025 unless Congress extends it, which may change the math for itemizing in future years.

Frequently Asked Questions

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

No. The mortgage interest deduction is only available if you itemize deductions on Schedule A. If you take the standard deduction, you cannot also claim itemized deductions, including mortgage interest. You must choose one or the other.

What if my mortgage interest is higher than the $750,000 cap?

You can only deduct interest on loans up to $750,000 of principal (or $1 million if the mortgage was taken before December 16, 2017). Interest on the amount above that cap is not deductible. Your lender can tell you how much of your loan balance falls within the deductible limit.

Do I need to keep receipts or the Form 1098 to claim the deduction?

Keep your Form 1098 with your tax records. The IRS uses it to verify your deduction if you are audited. You do not need separate receipts for each interest payment because the Form 1098 summarizes the year's total.

Can I deduct interest on a home equity loan used to pay off credit card debt?

No. Home equity loan interest is deductible only if the borrowed money was used to buy, build, or improve the home. If you used the loan to pay off other debts or for personal expenses, that interest is not deductible.

Does refinancing reset my mortgage interest deduction?

Refinancing does not reset the deduction itself—you still deduct interest on the new loan if you itemize. However, points paid on a refinance must be deducted over the life of the new loan, not all at once. If you refinance again, you can deduct any remaining points from the previous refinance in that year.