Can I Deduct Mortgage Interest on a Second Home?

You can take a mortgage interest deduction on a second home as an itemized deduction on Schedule A, as long as the property qualifies as a residence, the loan was used to buy, build, or substantially improve it, and your combined mortgage debt across your primary and second home stays within $750,000 ($375,000 if married filing separately). The One Big Beautiful Bill Act made that debt limit permanent, so it applies to post-2017 mortgages going forward.¹

What Counts as a Second Home

The tax code lets you designate one property beyond your main home as a “qualified residence” each year. It can be a house, condo, mobile home, or even a boat or RV, provided it has sleeping, cooking, and toilet facilities.¹ Own three or four properties? You still pick just one as your second home for the year.²

If you never rent the place out, it qualifies automatically. If you do rent it, you have to use it personally for the greater of 14 days or 10% of the days it was rented at fair market rent.³ Miss that threshold and the IRS reclassifies the property as a rental, which moves your interest off Schedule A entirely.

One helpful carve-out: if you rent the property fewer than 15 days all year, you don’t report the rental income at all, and the personal-use test is automatically met.³

The $750,000 Combined Debt Cap

The deduction covers interest on “acquisition indebtedness” — money borrowed to buy, build, or substantially improve your primary and second home. Interest on the first $750,000 of that combined debt is deductible ($375,000 if married filing separately).¹ Anything above the ceiling isn’t.

Owe $500,000 on your main home and $300,000 on a beach house? Your combined balance of $800,000 exceeds the cap by $50,000, and you’d prorate the deduction, losing the piece attributable to that excess. Track both balances through the year rather than waiting until January.

Older Mortgages Get a Higher Limit

If you took out your mortgage before December 16, 2017, the older $1 million combined limit still applies ($500,000 if married filing separately). Refinancing doesn’t kill that grandfathered treatment, as long as the new balance doesn’t exceed what was left on the original loan.¹

What the Loan Was Used For Matters

The interest deduction hinges on how the borrowed money was spent. If you do a cash-out refinance on your second home and use the extra cash to pay off credit cards or take a trip, the interest on that portion is not deductible. Same story with a home equity line of credit secured by the property: the interest qualifies only if the funds went toward home improvements on a qualified residence.⁴

Draw $80,000 on a HELOC, spend $50,000 on a new kitchen and $30,000 on a vacation, and only the interest tied to the $50,000 kitchen portion is deductible. Save the receipts. Tie specific draws to specific projects.

If You Rent the Second Home Part of the Year

When you rent your second home some of the time and use it personally the rest, mortgage interest gets split between the two uses, and the split determines where each portion lands on your return.

Personal Use Above the Threshold

If your personal use exceeds 14 days or 10% of rental days (whichever is greater), the property still counts as a residence. You allocate mortgage interest based on the ratio of rental days to total use days. The rental share goes on Schedule E against rental income; the personal share goes on Schedule A, subject to the $750,000 cap.¹

Rented 180 days, used personally 30 days: rental days over total use days is 180/210, about 86%. That share of your annual interest becomes a rental expense on Schedule E; the remaining 14% is itemized on Schedule A. Property taxes follow the same allocation.

Personal Use of 14 Days or Fewer

Keep personal use at or below 14 days (and below 10% of rental days), and the property is treated primarily as a rental. All the interest goes on Schedule E.⁵ The catch is that any net rental loss becomes subject to passive activity rules. You can deduct up to $25,000 of losses against other income if you actively participate and your modified adjusted gross income is $100,000 or less. The allowance phases out completely at $150,000 of modified AGI.⁶ Unused losses carry forward.

There’s a real choice here. More personal use keeps you on Schedule A but limits rental deductions. Less personal use unlocks full rental-expense treatment but exposes losses to passive activity limits. The answer depends on your income, other itemized deductions, and how much the property brings in. Whichever route you take, keep a day-by-day log of who used the property and why.

Points Are Amortized, Not Deducted Upfront

Points paid on a primary home mortgage can often be deducted in full the year you pay them. Second homes don’t get that treatment. Points on a second-home mortgage have to be spread evenly over the life of the loan.⁷ On a 30-year loan, that’s 1/30th of the points each year. Factor that in when you’re deciding whether to buy down the rate.¹

You Have to Itemize for Any of This to Matter

The mortgage interest deduction only helps if you itemize. For 2026, the standard deduction is $32,200 for married couples filing jointly and $16,100 for single filers.⁸ Add up your mortgage interest on both homes, your property taxes (capped at $10,000), charitable gifts, and other eligible expenses. If the total doesn’t clear the standard deduction, the interest deduction gives you nothing.

Adding a second home can be what pushes you over. Someone whose primary mortgage interest alone falls short of the standard deduction may cross it once the second-home interest and additional property tax show up. Run both numbers before you assume anything.

How to Report It

Your lender sends Form 1098 by January 31 with total mortgage interest paid the prior year. That’s your starting number, not necessarily your deduction. If combined debt exceeds $750,000, or if the property is mixed-use, you calculate the eligible slice yourself.

For a second home used only personally, the deductible interest goes on Schedule A (Form 1040), line 8b.¹ For mixed-use, split it: personal portion on Schedule A, rental portion on Schedule E.⁵ For a property used exclusively as a rental with no qualifying personal use, all the interest goes on Schedule E and the Schedule A deduction disappears.

Getting the mixed-use allocation wrong is one of the more common audit triggers in this area. Understating the rental portion inflates Schedule A while pulling down reported rental income, and the IRS cross-references Form 1098 totals against Schedule E. A running spreadsheet of rental days, personal days, and vacant days is easier to defend than a reconstruction at tax time.

1
Internal Revenue Service. Publication 936 (2025), Home Mortgage Interest Deduction
2
Office of the Law Revision Counsel. 26 USC 163 – Interest
3
Internal Revenue Service. Topic No. 415, Renting Residential and Vacation Property
4
Internal Revenue Service. Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses)
5
Internal Revenue Service. About Schedule E (Form 1040), Supplemental Income and Loss
6
Internal Revenue Service. Instructions for Form 8582 (2025)
7
Internal Revenue Service. Topic No. 504, Home Mortgage Points
8
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One Big Beautiful Bill