For most homeowners who itemize, mortgage interest is the single largest line item on the return. Here is what qualifies, what doesn't, and where the loan-amount limits kick in.
What qualifies
- Interest paid on a mortgage used to buy, build, or substantially improve your primary or a designated second home
- Points paid at closing that function as prepaid interest, often deductible over the life of the loan or, in some cases, in the year paid
- Interest on a home equity loan or line of credit, if the funds were used to buy, build, or substantially improve the home securing the loan
What does not qualify
Home equity debt used for purposes unrelated to the home itself — paying off credit cards, funding a vacation, covering unrelated expenses — generally does not qualify for the mortgage interest deduction, even though the loan is secured by your house. The use of the funds, not just the type of loan, determines deductibility.
The loan-amount limit
Mortgage interest is deductible only on acquisition debt up to a set principal limit, which is higher for loans originated before certain historical cutoff dates and slightly lower for more recently originated loans. Homeowners with jumbo mortgages well above the applicable limit can only deduct interest attributable to the portion of the loan under that ceiling — the excess interest is not deductible.
Where this fits in your itemizing decision
Mortgage interest is front-loaded on most amortizing loans — you pay significantly more interest in the early years than in the later years — which means itemizing tends to make the most sense for newer mortgages and gradually loses its advantage as the loan matures and the principal balance shrinks. Combine this figure with SALT (see SALT Deduction Cap Explained) and charitable giving inside the deduction calculator to see your full itemized total against the standard deduction.
Your Form 1098
Your mortgage servicer sends a Form 1098 each January reporting the total interest you paid during the year — this is the figure you'll enter directly into your itemized deduction worksheet or our calculator.
Refinancing considerations
Points paid on a refinance are generally deducted gradually over the life of the new loan rather than all at once, unlike points paid on an original home purchase loan, which may be deductible in the year paid under certain conditions. Keep your closing disclosure documents from any refinance for this reason.
Frequently asked questions
Can I deduct interest on a second home?
Yes, interest on a qualifying second home can be deductible in addition to your primary residence, subject to the same overall acquisition-debt loan limit combined across both properties.
Does a HELOC ever qualify?
Only if the funds were used to buy, build, or substantially improve the home securing the debt — a HELOC used for other purposes generally does not generate deductible interest.
Is PMI (private mortgage insurance) deductible?
The deductibility of mortgage insurance premiums has changed multiple times in recent tax law history — verify current-year rules before assuming it qualifies.