Can You Deduct Mortgage Interest? – Yes — but only if you itemize deductions on your federal tax return. The home mortgage interest deduction remains one of the most valuable tax breaks for U.S. homeowners in 2026, provided you meet IRS rules on qualified loans, debt limits, and proper use of proceeds.
This guide explains exactly who qualifies, the current limits for 2025 and 2026 tax years, what counts as deductible interest, and how to claim it — all based on the latest IRS Publication 936 (for 2025 returns) and related tax law updates.
What Is the Mortgage Interest Deduction?
The mortgage interest deduction lets you subtract the interest you paid on a qualified home loan from your taxable income. It applies to interest on mortgages, second mortgages, and certain home equity debt — but only when the loan is used to buy, build, or substantially improve your home.
You must itemize deductions on Schedule A (Form 1040) to claim it. The deduction does not apply if you take the standard deduction.
Who Can Claim the Mortgage Interest Deduction in 2026?
You qualify if you meet these three basic IRS tests:
- You file Form 1040 or 1040-SR and itemize deductions on Schedule A.
- The mortgage is a secured debt on a qualified home (your main home or a second home).
- You have an ownership interest in the home.
Both you and the lender must intend that the loan be repaid. Married couples filing jointly can combine their limits.
Current Mortgage Interest Deduction Limits (2025–2026 Tax Years)
The limits depend on when you took out the mortgage:
- Loans incurred before December 16, 2017 (grandfathered debt): You can deduct interest on up to $1 million of debt ($500,000 if married filing separately).
- Loans incurred after December 15, 2017: You can deduct interest on up to $750,000 of debt ($375,000 if married filing separately).
These dollar limits apply to the combined mortgages on your main home and second home. The $750,000 cap is now permanent thanks to the One Big Beautiful Bill Act (signed 2025), eliminating the previous sunset date.
Important: Interest on debt above these limits is generally not deductible.
What Counts as a Qualified Home and Deductible Interest?
A qualified home includes a house, condo, cooperative, mobile home, house trailer, or boat with sleeping, cooking, and toilet facilities.
Deductible interest must be home acquisition debt — meaning the loan proceeds were used to buy, build, or substantially improve the home that secures the loan.
- Home equity loans and HELOCs: Interest is deductible only if the funds were used to buy, build, or substantially improve the home securing the loan. Personal-use proceeds (e.g., vacations, debt consolidation) do not qualify.
- Refinances: Only the portion used for acquisition, construction, or substantial improvement qualifies.
- Points: Prepaid interest (points) paid at closing may be fully deductible in the year paid or amortized over the life of the loan.
Private mortgage insurance (PMI) premiums are no longer separately deductible for 2025 returns (per IRS Publication 936). Some 2026 updates under new legislation may treat qualifying PMI as deductible interest — check IRS.gov for your filing year.
How to Claim the Mortgage Interest Deduction?
- Receive Form 1098 — Your lender sends this by January 31. Box 1 shows mortgage interest (and points) paid during the year.
- Enter on Schedule A:
- Line 8a: Interest and points reported on Form 1098.
- Line 8b: Other deductible home mortgage interest not on Form 1098.
- Line 8c: Points not on Form 1098.
- Use the Worksheet in Publication 936 if your total debt exceeds the limits or you have mixed-use loans.
File electronically or use tax software — it will guide you through the calculations automatically.
Common Scenarios and Limitations
- Second homes: Fully allowed within the debt limits.
- Rental properties: Interest is deducted on Schedule E as a rental expense (not as an itemized deduction).
- High-balance mortgages: You can still deduct a percentage of interest if your loan exceeds the limit (see IRS worksheet in Pub 936).
- Married filing separately: Halved limits apply ($375,000 or $500,000 depending on loan date).
- Itemizing vs. standard deduction: For 2025, the standard deduction is roughly $15,000 (single) and $30,000 (joint). Many homeowners no longer itemize unless they have significant mortgage interest, property taxes, or charitable gifts.
Tax Tips to Maximize Your Deduction
- Keep excellent records of loan proceeds and how they were used.
- Refinance strategically — only new acquisition debt qualifies under the limits.
- Consider bunching deductions in years when you exceed the standard deduction.
- Consult a tax professional if you have a home office, rental portion, or complex refinancing.
Always refer to the official IRS Publication 936 (Home Mortgage Interest Deduction) for your specific situation. The rules are current as of the 2025 tax year filing season in 2026.
Bottom line: Most U.S. homeowners with mortgages under the debt limits can still deduct their mortgage interest in 2026 — as long as they itemize and follow the qualified-use rules. Run the numbers with your tax software or a CPA to see exactly how much you’ll save this year. For the latest forms and publications, visit IRS.gov.