If you have a mortgage, you may be able to deduct the interest you pay each year from your taxable income, which can result in meaningful tax savings. This article explains how the mortgage interest deduction works, what loan types and limits apply, how HELOC interest is treated and what other tax breaks may be available to homeowners. All figures reflect tax year 2025 (returns filed in 2026).
Homeownership offers certain tax advantages that may reduce your taxable income, depending on your personal situation. One significant benefit is the mortgage interest tax deduction, which allows homeowners to deduct the interest portion of their mortgage payments.
A mortgage payment typically includes repayment of the loan principal, interest, and in some cases property taxes and insurance premiums held in escrow. The mortgage interest tax deduction applies specifically to the interest you pay annually on your mortgage. Since a substantial portion of monthly mortgage payments goes toward interest, particularly in the early years of a loan, this deduction can be highly beneficial for homeowners who itemize their returns.
What Is the Mortgage Interest Tax Deduction?
The IRS documents the rules for this deduction in Publication 936: Home Mortgage Interest Deduction. Tax codes are subject to change, so it is important to stay current each filing year. You may be able to deduct the entire interest portion of your mortgage payment if you itemize your deductions on Schedule A (Form 1040). The interest must generally be on a loan secured by a home you own, and can include a first or second mortgage, a home improvement loan, a home equity loan or a refinanced mortgage.
Mortgage Interest Deduction Limits
Deduction limits depend on when the loan was taken out:
- Loans originated after December 15, 2017: Interest is deductible on up to $750,000 of mortgage debt ($375,000 for married couples filing separately).
- Loans originated on or before December 15, 2017: Interest is deductible on up to $1,000,000 of mortgage debt ($500,000 for married couples filing separately).
Additional limits may apply. Loan proceeds not used to buy, build or substantially improve your home are not eligible for the deduction unless the loan was taken out before October 13, 1987. Loans that exceed the fair market value of the home are also not eligible.
HELOC Interest Deductibility
For tax years 2018 through 2025, interest on a home equity loan or line of credit (HELOC) is only deductible if the funds were used to buy, build or substantially improve the home that secures the loan. Interest on the same debt used for personal expenses, such as paying off credit cards, is not deductible during this period.
For tax years before 2018 and beginning in 2026 (when the current rules are scheduled to expire), HELOC interest may be deductible regardless of how the proceeds were used, subject to certain dollar limits. For example, interest on a home equity loan used to pay personal living expenses may be deductible in those years.
See IRS Publication 936 for full details, or consult a tax advisor. At Tax Services, our tax professionals can help you determine whether your HELOC interest qualifies for a deduction.
Standard vs. Itemized Deductions
When filing, you first need to decide whether to take the standard deduction or to itemize. The mortgage interest deduction only applies if you itemize. Most taxpayers choose whichever method results in the lower overall tax liability. Use IRS criteria to evaluate both options, and run the numbers under each scenario before filing.
Standard Deduction for Tax Year 2025 (Returns Filed in 2026)
| Filing Status | 2025 Standard Deduction |
|---|---|
| Single; Married filing separately | $15,000 |
| Married filed jointly; Surviving spouse | $30,000 |
| Head of household | $22,500 |
The standard deduction amount also depends on whether the taxpayer is age 65 or older, blind or claimed as a dependent by another taxpayer. Taxpayers who are 65 or older on the last day of the year and do not itemize are entitled to a higher standard deduction.
Additional Standard Deduction for Those 65 and Older (Tax Year 2025)
| Single or head of household | |
|---|---|
| 65 and older or blind | +$2,000 |
| 65 and older and blind | +$4,000 |
| Married filing jointly or separately; Surviving spouse | |
|---|---|
| 65 and older or blind | +$1,600 per qualifying individual |
| 65 and older and blind | +$3,200 per qualifying individual |
If you choose to itemize, you must file Schedule A, Form 1040. Itemized deductions that may be claimed include state and local income or sales taxes, real estate and personal property taxes, home mortgage interest, personal casualty and theft losses from a federally declared disaster, gifts to a qualified charity and unreimbursed medical and dental expenses that exceed 7.5% of adjusted gross income.
Before filing, you should receive a Form 1098 (Mortgage Interest Statement) from your lender. Lenders are required to issue this form if you paid $600 or more in mortgage interest, mortgage insurance premiums, or points during the tax year. The amount reported on your Form 1098 is what you will report to the IRS when claiming the deduction.
Deducting Mortgage Interest After Refinancing
If you recently refinanced your home, you can still deduct mortgage interest on the new loan. Depending on when the refinance closed, you may receive two Form 1098s for the tax year: one from your original lender for the period you held the initial mortgage and one from your new lender for the interest paid after refinancing.
Other Tax Breaks for Homeowners
In addition to the mortgage interest deduction, homeowners may be eligible for other deductions, including discount points, property taxes, home office expenses and medically necessary home improvements. These deductions may not be as significant individually, but all eligible amounts add up and may be worth claiming. It is always best to consult a tax professional before filing, as every situation is different.
Need Help?
Our tax professionals can help you determine whether your mortgage interest is deductible and what amount applies to your situation. Call us at 800.231.1626.
Disclosures
The guidance above pertains to IRS rules on deducting mortgage interest. Your state may also offer deductions for mortgage interest, but state regulations can differ from IRS guidelines. Consult your tax advisor for clarification specific to your situation.
