When you file your income tax return, the mortgage interest deduction (MID) can be a valuable benefit of owning a home—or it might not help at all. Whether you gain from this deduction depends on your total itemized deductions compared to the standard deduction, which varies by your mortgage interest paid, other deductions, filing status, and the tax year.
Is Mortgage Interest Tax Deductible?
Yes, mortgage interest is generally tax deductible, but there are important rules and limits to know:
The Tax Cuts and Jobs Act (TCJA) of 2017 capped the deduction to interest on the first $750,000 of mortgage debt for loans taken after December 15, 2017. Before this, the limit was $1 million.
For married couples filing separately, these limits are halved.
The TCJA allows deductions on interest for both your primary home and a second home.
However, interest on home equity loans or lines of credit (HELOCs) is deductible only if the money was used to buy, build, or improve the home securing the loan. Previously, up to $100,000 of home equity debt interest was deductible regardless of use.
These TCJA rules will expire after 2025 unless Congress extends them. After that, old rules may return.
How to Claim the Mortgage Interest Deduction
To claim the MID, you must itemize your deductions instead of taking the standard deduction. Itemizing makes sense only if your total deductions exceed the standard deduction for your filing status.
For 2024 tax returns (filed in 2025), the standard deduction amounts are:
- $14,600 for individuals
- $29,200 for married couples filing jointly
- $21,900 for heads of household
These amounts adjust yearly for inflation. Before TCJA, standard deductions were much lower.
If your itemized deductions, including mortgage interest and possibly property taxes, surpass these amounts, itemizing can save you more on taxes.
Keep in mind, with a fixed-rate mortgage, the interest portion of your payment decreases over time, so your deductible amount may shrink each year.
Should You Buy a Home Just for the Mortgage Interest Deduction?
The MID is more valuable if you have higher income and a larger mortgage, but it should never be the main reason to buy a home or take on a bigger loan than you can afford. Consider your overall financial comfort and expenses first.
If you plan to buy a home and itemizing deductions makes sense, the MID can offer meaningful tax savings.
Mortgage Interest Deduction FAQs
1.Is mortgage interest 100% deductible?
You can deduct interest on up to $750,000 of mortgage debt ($375,000 if married filing separately) for 2024, including primary and second mortgages.
2.Is there a $10,000 limit on mortgage interest deduction?
No. The $10,000 limit applies to state and local tax deductions, not mortgage interest. You can deduct interest on up to $750,000 of mortgage debt if you itemize.
3.Can you no longer deduct mortgage interest?
You can still deduct mortgage interest if you itemize. Interest on home equity loans or HELOCs is deductible only if used for buying, building, or improving your home, through 2025.
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