IRS Publication 936: Home Mortgage Interest Deduction Limits and Claims

The home mortgage interest deduction lets you write off the interest you pay on up to $750,000 of mortgage debt used to buy, build, or substantially improve your main home or one second home ($375,000 if you’re married filing separately). You can only claim it if you itemize on Schedule A instead of taking the standard deduction. For 2026, the standard deduction is $32,200 for joint filers, $24,150 for heads of household, and $16,100 for single filers and married individuals filing separately.¹ Those thresholds are high enough that many homeowners never clear them, so the first question isn’t how much interest you paid. It’s whether itemizing beats the standard deduction at all.

What Loans and Homes Qualify

Two conditions have to line up. The debt has to be secured by the home, meaning you signed a mortgage, deed of trust, or similar recorded instrument that gives the lender the right to foreclose. And the loan proceeds have to have been used to buy, build, or substantially improve that same home.² An unsecured personal loan you used to buy a house doesn’t qualify, even if every dollar went to the purchase.

The home itself can be a house, condo, co-op, mobile home, house trailer, or boat, as long as it has sleeping, cooking, and toilet facilities.² You get your main home plus one second home. A third property doesn’t count, no matter how you use it.

Seller-financed purchases are eligible. If the previous owner carries the note, the interest is deductible so long as the debt is properly secured and recorded. The reporting is a little different, and that’s covered further down.

A home under construction can count as a qualified home for up to 24 months while it’s being built, as long as it actually becomes your qualified home when it’s ready.³ Interest on a loan for bare land you plan to build on someday isn’t deductible until construction actually starts.

If you rent out the second home for part of the year, you have to use it personally for more than 14 days, or more than 10% of the days it was rented at fair price, whichever is larger.² Fall short of that and the IRS treats the property as a rental, which pushes the interest onto Schedule E under an entirely different set of rules.

The $750,000 Cap and Older Grandfathered Loans

For mortgages taken out after December 15, 2017, interest is deductible only on the first $750,000 of acquisition debt ($375,000 if married filing separately). The cap covers your main home and second home combined. The One Big Beautiful Bill Act made this limit permanent, so it isn’t scheduled to sunset.²

Mortgages taken out on or before December 15, 2017 keep a higher limit. Interest on these grandfathered loans is deductible on up to $1,000,000 of principal ($500,000 if married filing separately).² If you have both grandfathered debt and newer debt, the grandfathered portion is counted first against the $1,000,000 limit, and any newer debt fills the remaining room up to $750,000.

There’s also an older category for debt secured on or before October 13, 1987. Interest on those mortgages is fully deductible regardless of the loan amount or how the money was used. These loans are rare at this point, but if you have one, all the interest counts.

If your balances exceed the applicable cap, you can’t deduct all your interest. Publication 936 includes a worksheet (Table 1) that walks through the math: you divide the qualified loan limit by the average balance of your mortgages, then multiply the resulting decimal by the interest you paid.²

HELOCs and Cash-Out Refinances

Interest on a home equity loan or HELOC is deductible only when you use the money to buy, build, or substantially improve the home that secures the loan.² The One Big Beautiful Bill Act made that restriction permanent. Using a HELOC to consolidate credit cards, pay tuition, or cover medical bills leaves the interest non-deductible, and the balance still counts toward the overall $750,000 cap.

Cash-out refinances work on the same purpose test. The refinanced loan keeps the deductible status of the old one, but only up to the balance you owed at the time of the refi. Any cash you pulled out on top of that is deductible only if you used it to substantially improve the home.² Using the extra cash for a car or credit card payoff makes the interest on that portion personal interest, which isn’t deductible at all.

Record-keeping is what makes or breaks this. If you take a $100,000 HELOC and split it between a $60,000 kitchen renovation and $40,000 in student loan payoff, only the interest on the $60,000 is deductible. Save contractor invoices and receipts that tie the borrowed dollars directly to the improvement work.

Points, Fees, and What Doesn’t Count

Points are upfront interest, sometimes labeled loan origination fees or discount points, calculated as a percentage of the loan. Points paid on a loan to buy your main home are generally deductible in full in the year you pay them, but only if all of these apply:²

The loan is secured by your main home, not a second home.
Charging points is an established practice in your area and the amount is not more than what’s typical.
You use the cash method of accounting, which covers most individuals.
The points weren’t charged in place of items normally itemized on the settlement statement, such as appraisal, title, or attorney fees.
The cash you brought to closing (down payment, escrow, earnest money) was at least equal to the points charged, and you didn’t borrow the point money from the lender.
The points appear clearly on the closing disclosure and were calculated as a percentage of principal.
The loan was used to buy or build your main home.

Points that fail any of those tests, along with points on a refinance or a second-home purchase, have to be spread over the life of the loan and deducted proportionally.² If you later refinance again or pay the loan off early, any remaining unamortized points can be deducted in that year.

A prepayment penalty for paying off your mortgage early counts as deductible interest, and so does a late payment charge, provided neither one is really a fee for a specific service performed by the lender.²

The deduction for qualified mortgage insurance premiums (PMI) has expired and is not available for 2026 returns. Legislation to restore it has been introduced but not enacted.²

Charges tied to specific loan services aren’t interest and can’t be deducted as points or amortized. That includes appraisal fees, inspection fees, title fees, attorney fees, notary fees, and property taxes paid at closing.² Some of those may matter for your cost basis, but they don’t reduce your taxable income as mortgage interest.

Refinancing an Older Loan

If you refinance a pre-December 16, 2017 mortgage, the new loan holds its grandfathered status, but only up to the principal balance that remained on the old loan. Anything above that is treated as new acquisition debt subject to the $750,000 cap. Grandfathered treatment also lasts only for what would have been the remaining term of the original loan; once that clock runs out, the whole balance becomes ordinary acquisition debt.²

Balloon notes get a special rule. If the original principal wasn’t amortized over the loan term, the refinanced debt keeps grandfathered status for the term of the first refinancing, up to a maximum of 30 years.²

How to Claim It

Report deductible mortgage interest on Schedule A (Form 1040).⁴ Your lender sends Form 1098 by the end of January. Box 1 shows the mortgage interest received during the year, and Box 6 shows any deductible points paid on the purchase of your principal residence.⁵ The Box 1 amount goes on Schedule A, line 8a.

If you’re paying interest to a private seller instead of a bank, you won’t get a Form 1098. Put the interest on Schedule A, line 8b, and write the seller’s name, address, and taxpayer identification number on the dotted lines next to that line. You also need to give the seller your Social Security number; a Form W-9 handles the exchange. Missing this reporting can trigger a $50 penalty per failure.²

When several people share a mortgage but only one gets the Form 1098, the others can still deduct their share. Report your portion on Schedule A, line 8b, as home mortgage interest not reported to you on Form 1098, and list the name and address of the person who did receive the form. If you file on paper, attach an explanation showing the split. Keep the supporting records for at least three years after filing.⁶

Whether Itemizing Actually Helps

The deduction is only worth something if your total itemized deductions beat the standard deduction. Run the numbers before you assume you’ll benefit. A married couple with a $400,000 mortgage at 7% pays roughly $28,000 in interest in the first year, which is still below the $32,200 joint standard deduction before any other itemizable expenses.

That means smaller mortgages, lower rates, and older loans (where more of each payment goes to principal) often produce less interest than the standard deduction itself. Add up your mortgage interest, your state and local taxes, and your charitable contributions, then compare the total against your standard deduction. Whichever number is bigger is the one to use.

1
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One Big Beautiful Bill
2
Internal Revenue Service. Publication 936 (2025), Home Mortgage Interest Deduction
3
Internal Revenue Service. Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses)
4
Internal Revenue Service. Instructions for Schedule A (Form 1040) (2025)
5
Internal Revenue Service. Instructions for Form 1098 (Rev. April 2025)
6
Internal Revenue Service. Other Deduction Questions