How does the mortgage interest tax deduction work? Experts explain
Tax season is officially here, and millions of Americans are now preparing to file their taxes for the income they earned in 2024. If you own a home, the mortgage interest deduction could reduce your tax liability — which could be especially useful given today's high mortgage interest rates environment. But if you want to take advantage of this opportunity to lower your tax burden, understanding if and how you qualify is key.
Recent changes have reshaped how this tax deduction works. So, we asked tax and financial experts to answer common questions about claiming and making the most of it. Here's what they want you to know.
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How does the mortgage interest tax deduction work? Experts explain
"The government is subsidizing the purchase of your home by allowing you to deduct your mortgage interest payments," says Adam Brewer, tax controversy attorney at AB Tax Law.
According to Lupe Valdivia, CEO of West Coast Tax Service, you can write off part of your mortgage interest and property taxes. First-time homebuyers can also deduct a portion of closing costs, including pre-paid points and interest paid through escrow.
When you file taxes, these itemized deductions are claimed on Schedule A of Form 1040.
What is the mortgage interest tax deduction?
"The mortgage interest tax deduction is a [tax benefit that] allows you to subtract the interest paid on your home loan from your taxable income," says Jordan Leaman, certified financial planner and branch operations manager at Churchill Mortgage.
Lisa Greene-Lewis, certified public accountant and tax expert at TurboTax, notes that under the Tax Cuts and Jobs Act, tax filers can deduct interest based on up to $750,000 in mortgage indebtedness. If you bought or refinanced your home before December 16, 2017, you may be able to deduct interest based on up to $1 million in mortgage indebtedness.
Find out more about the mortgage loan options available to you here.
Who qualifies for the mortgage interest tax deduction?
Qualifying for the mortgage interest tax deduction is straightforward. Unlike some tax benefits, there are no income restrictions, but experts say you'll need to meet these specific conditions to qualify:
Have itemized deductions above standard amounts:"You need to itemize deductions on your tax return rather than take the standard deduction," says Leaman. The standard deduction for 2025 is $15,000 for single filers and $30,000 for couples filing jointly. Your combined itemized deductions must exceed these amounts to make the mortgage interest deduction worthwhile.
Have a loan secured by your home: The mortgage loan must be legally tied to your property as collateral. This gives your lender the right to claim your property if you default on payments.
Live in the mortgaged property: "You [must] live in the home and it has to be a first or second home," says Valdivia.
Use the loan for home purposes: Your mortgage must be used to buy, build or improve your home.
Who doesn't qualify for the mortgage interest tax deduction?
Even if you have a mortgage, certain situations might prevent you from claiming this deduction, including:
The standard deduction exceeds the itemized total: If your mortgage interest, along with other itemized deductions, totals less than your standard deduction amount, you'll save more on taxes by skipping this deduction.
Your spouse takes a different deduction approach: According to Brewer, married couples filing separately must follow special rules. If one spouse itemizes deductions, the other must also itemize. You can't claim the mortgage interest deduction if your spouse takes the standard deduction.
You only own rental property: Rental property owners can't use this deduction. However, Valdivia says you can still benefit by applying mortgage interest as an expense to offset the rental income generated from that property.
Mortgage interest tax deduction pros and cons to know
Below, Greene-Lewis, Leaman and Valdivia break down what makes this deduction valuable and where it falls short.
To start, this tax deduction offers several key advantages, including:
It opens up other deductions: When you itemize mortgage interest, you can also claim other deductions such as property taxes, charitable donations and medical expenses.
It reduces taxable income: Lowering your taxable income through this deduction can lead to significant tax savings, especially if you have a larger mortgage.
Mortgage points are deductible: You can deduct loan origination points as part of your mortgage interest. This gives you an extra tax benefit in the year you buy or refinance.
But it comes with some limitations, like:
Refinancing restrictions: If you refinance your mortgage loan, you must spread point deductions across the loan's lifetime rather than claiming them all at once.
Benefit limitations:"Higher-income homeowners with bigger mortgages tend to get the biggest benefits," says Leaman. Those with smaller loans might find the standard deduction more valuable.
Deduction exclusions: You can't deduct large expenses such as down payments, home insurance or immediate repair costs.
The bottom line
The mortgage interest tax deduction can be beneficial for many homeowners, but it isn't a one-size-fits-all benefit.
"I see so many opportunities missed simply because taxpayers followed advice from a friend and [didn't] claim a deduction they were entitled to," says Valdivia.
So, it may benefit you to consult a tax professional who can review your finances. They can determine whether itemizing would save you more than the standard deduction and identify other tax advantages you might be missing.
Your unique situation — including your loan amount, interest rate and other potential deductions — will determine whether this tax break makes sense.
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