Mortgage Interest Deduction Limits 2025-2026 – The mortgage interest deduction remains one of the most valuable tax breaks for American homeowners. With the Tax Cuts and Jobs Act (TCJA) changes now made permanent under the One Big Beautiful Bill Act (OBBBA, P.L. 119-21) signed July 4, 2025, understanding the exact mortgage interest deduction limits for 2025 and 2026 is essential whether you’re filing your 2025 return in 2026 or planning ahead for 2026 taxes.
This guide breaks down the current limits, who qualifies, how to calculate your deduction, and what changed permanently — all based on the latest IRS Publication 936 (2025) and official tax guidance.
What Is the Mortgage Interest Deduction?
The home mortgage interest deduction lets you deduct interest paid on a qualified home mortgage from your taxable income when you itemize deductions on Schedule A (Form 1040). It applies to your main home and one second home (such as a vacation property). Only interest on home acquisition debt — loans used to buy, build, or substantially improve the home that secures the loan — qualifies.
Home equity loans or HELOCs are deductible only if the proceeds are used for those same purposes and stay within the overall debt limits.
Mortgage Interest Deduction Limits for Tax Years 2025 and 2026
For both tax year 2025 and tax year 2026, the IRS limits remain unchanged and are now permanent:
- $750,000 ($375,000 if married filing separately) for mortgages taken out after December 15, 2017.
- $1 million ($500,000 if married filing separately) for mortgages taken out on or before December 15, 2017 (grandfathered debt).
These caps apply to the combined total of all qualifying mortgages on your main and second homes. The limits are not indexed for inflation.
Important note: The OBBBA made the $750,000 limit permanent, eliminating the previous TCJA sunset that would have restored the $1 million cap after 2025.
Grandfathered Loans vs. New Mortgages: Key Differences
- Pre-Dec. 16, 2017 loans: You can deduct interest on up to $1 million of debt (or $500,000 if married filing separately). This includes refinances of pre-2018 debt, as long as the new loan does not exceed the outstanding balance at the time of refinancing.
- Post-Dec. 15, 2017 loans: The tighter $750,000 cap applies. Any new purchase, construction, or improvement loans fall under this limit.
If you have a mix of old and new debt, the IRS applies the higher $1 million limit only to the pre-2018 portion, with the $750,000 limit applying to newer debt. Use IRS Table 1 (Worksheet to Figure Your Qualified Loan Limit) in Publication 936 to calculate the exact deductible amount.
How the One Big Beautiful Bill Act Permanently Changed the Rules?
Enacted on July 4, 2025, the OBBBA eliminated the scheduled expiration of TCJA provisions. The $750,000 mortgage interest deduction limit is now a permanent feature of the tax code rather than a temporary measure. This provides long-term certainty for homebuyers and homeowners planning refinances or second-home purchases.
Additional OBBBA homeowner benefit (effective 2026): Mortgage insurance premiums (PMI or MIP) are once again treated as qualified mortgage interest for loans used to acquire or improve your home.
Who Qualifies for the Mortgage Interest Deduction in 2025-2026?
To claim the deduction you must:
- Itemize deductions on Schedule A (most homeowners benefit only if total itemized deductions exceed the standard deduction — $15,000 single / $30,000 married filing jointly for 2025, with inflation adjustments expected for 2026).
- Own the home (or have a legal obligation to pay the mortgage interest).
- Have a qualified mortgage secured by your main or second home.
- Use the loan proceeds to buy, build, or substantially improve that home.
The deduction is available for both primary residences and qualified second homes. Rental properties follow different rules (see Pub. 527).
Home Equity Loans and HELOCs: What’s Deductible?
Interest on home equity debt is deductible only if the loan proceeds are used to buy, build, or substantially improve the home that secures the loan. The interest counts toward your overall $750,000 / $1 million limit. Personal-use home equity loans (e.g., debt consolidation or vacations) are not deductible.
How to Calculate Your Deductible Mortgage Interest?
- Gather Form 1098 from your lender(s) showing total interest paid.
- Determine your qualified loan limit using IRS Publication 936 Table 1.
- If your total mortgage debt exceeds the limit, you can deduct only a percentage of the interest (limit ÷ average mortgage balance).
- Add any qualifying PMI/MIP (starting 2026).
Example: You have a $900,000 mortgage taken out in 2024. Your average balance in 2025 is $880,000. You can deduct interest on only $750,000 / $880,000 of the total interest paid.
Use the free IRS worksheet in Pub. 936 or tax software to avoid errors.
Tips for Maximizing Your Mortgage Interest Deduction in 2025-2026
- Itemize strategically — Compare your total itemized deductions against the standard deduction.
- Refinance wisely — Keep pre-2018 loans under the $1 million grandfathered limit.
- Track home improvements — Document use of HELOC/HELOAN proceeds for capital improvements.
- File jointly when possible — Married filing jointly gets the full $750,000/$1 million limits.
- Consult a tax professional — Especially with multiple properties or refinances.
Common Mistakes to Avoid
- Claiming interest on loans used for personal expenses.
- Forgetting to prorate when debt exceeds the limit.
- Missing the PMI deduction starting in 2026.
- Assuming the $1 million limit applies to new purchases.
Frequently Asked Questions About Mortgage Interest Deduction Limits 2025-2026
Can I still deduct mortgage interest on a $1 million loan in 2026?
Yes — but only if the loan was originated on or before December 15, 2017 (grandfathered). Newer loans are capped at $750,000.
Does the limit apply per person or per couple?
The $750,000/$1 million limit is per tax return. Married filing separately gets half.
Is there a phase-out based on income?
No — unlike some credits, the mortgage interest deduction has no income phase-out.
What about reverse mortgages or co-ops?
Special rules apply; see IRS Publication 936 for details.
Final Thoughts: Plan Ahead for 2025 and 2026 Taxes
The mortgage interest deduction limits for 2025-2026 are now locked in at $750,000 for new debt and $1 million for grandfathered debt. The OBBBA provides the stability homeowners have wanted since the TCJA was passed.
Review your mortgage statements, run the numbers with IRS Publication 936, and consult a tax advisor or use reliable tax software to ensure you claim every dollar you’re entitled to. Small planning steps today can lead to significant tax savings on your 2025 and 2026 returns.
For the most current forms and worksheets, always refer to the official IRS website and Publication 936. Tax laws can still change, so stay informed as you prepare your returns.