Is There a Limit to Mortgage Tax Deductions?

Yes. You can deduct the interest on up to $750,000 of mortgage debt ($375,000 if married filing separately) used to buy, build, or substantially improve your main home and one second home combined, if you took the debt out after December 15, 2017. Debt from before December 16, 2017, keeps the older $1 million limit ($500,000 married filing separately). The limit applies to the loan balance, not to the interest, and the 2025 tax law made it permanent, so the $1 million cap did not return in 2026.

The limits by loan date

The date the debt was taken out decides which cap applies. Box 3 of your Form 1098 shows the origination date.

A buyer who signed a written binding contract before December 15, 2017, to close before January 1, 2018, and who bought the home before April 1, 2018, also gets the $1 million limit.

The caps are shared, not stacked. A married couple filing jointly has one $750,000 limit for both homes together. If you have an older loan and a newer one, the newer debt gets only the room left under $750,000 after the older debt. For example, if you still owe $600,000 on a 2015 mortgage and take a $300,000 home equity loan in 2026 to build an addition, your combined limit is $750,000. Interest on $750,000 of the $900,000 total is deductible, about 83%.

How refinancing, a second home, and home equity debt count

Refinancing. A refinance keeps the old loan's status up to the principal balance just before the refinance. If you refinance a 2016 mortgage with a $700,000 balance into a new $700,000 loan, the new loan still falls under the $1 million limit for the rest of the original loan's term. If you take cash out, the extra amount is new debt. It counts toward the $750,000 limit only if you spend it substantially improving the home; otherwise its interest is not deductible. More on the loan side is in what it means to refinance a mortgage.

A second home. You can treat only one home besides your main home as a qualified home, and its mortgage shares the same $750,000 limit. A buyer with a $550,000 mortgage on a main home and a $350,000 mortgage on a vacation home has $900,000 of debt against one $750,000 cap.

Home equity loans and HELOCs. Home equity debt counts toward the limit only when you spend it buying, building, or substantially improving the home that secures it. Money spent on anything else, such as a car or tuition, produces no deductible interest at any balance. The full set of qualifying tests is in whether you can deduct your mortgage interest.

Large loans. Borrowers with a jumbo loan, a mortgage above the conforming loan limit, are the ones most likely to pass $750,000 on a single home. See what a jumbo or super jumbo loan is.

How the 2017 and 2025 tax laws changed the deduction

The current rules come from two laws.

• The 2017 tax law (Tax Cuts and Jobs Act). For 2018 through 2025, it cut the debt limit from $1 million to $750,000 for new loans and stopped the deduction for home equity debt not spent on the home. Before 2018, you could deduct interest on up to $100,000 of home equity debt no matter how you used the money. The law also raised the standard deduction. These changes were set to expire after 2025, which would have brought back the $1 million limit for all loans.
• The 2025 tax law (One Big Beautiful Bill Act, signed July 4, 2025). Section 70108 removed the 2025 end date, so the $750,000 limit and the home equity rule are now permanent for tax years starting in 2026. It also deleted the provision that would have applied the $1 million limit to all mortgages, whatever their date. The same law restored the mortgage insurance premium deduction starting in 2026. It shrinks once adjusted gross income (AGI, your total income minus certain adjustments, shown on Form 1040) passes $100,000 and ends above $109,000 ($50,000 and $54,500 married filing separately). The law also raised the state and local tax cap to $40,400 for 2026 ($20,200 married filing separately), with a smaller cap when modified AGI (AGI plus certain excluded foreign income) is above $505,000 ($252,500 married filing separately).

Why the limit matters less than the standard deduction

A loan well under $750,000 can still produce no tax benefit because of the standard deduction, which the 2025 law kept at its higher level. For 2026 it is $16,100 for single filers, $24,150 for heads of household, and $32,200 for married couples filing jointly. Mortgage interest reduces your taxable income only to the extent that your total itemized deductions exceed that figure. If you give cash to charity, the comparison bar is a little higher, because starting in 2026 people who take the standard deduction can also deduct up to $1,000 ($2,000 married filing jointly) of cash gifts.

For example, a married couple with a new $250,000 mortgage at 6.25% pays about $15,500 of interest in the first year. Add $8,000 of property and state income taxes and their itemized total is $23,500, which is $8,700 short of the $32,200 standard deduction. They take the standard deduction, and the mortgage interest provides no separate tax benefit.

High earners face one more cap. Starting in 2026, if your taxable income plus your itemized deductions is above the point where the 37% bracket begins ($640,600 single, $768,700 married filing jointly), your itemized deductions are reduced by 2/37 (about 5.4%) of the smaller of your itemized total or that excess.

If your mortgage is over the limit

You do not lose the whole deduction. You deduct a share of the interest equal to your limit divided by your average mortgage balance for the year, using the Table 1 worksheet in IRS Publication 936. A $1,000,000 loan from 2023 with an average 2026 balance of $990,000 is limited to $750,000, so about 76% of the interest is deductible. The step-by-step math is in how to calculate the mortgage tax deduction.

Deductible points are cut by the same percentage. Other deductible costs are listed in mortgage costs you can deduct besides interest, and the full list of homeowner tax breaks is in tax benefits available to homeowners.