Mortgage Interest Deduction allows homeowners to reduce their taxable income by deducting the amount paid in mortgage interest. This is a remarkably effective tool that facilitates homeownership. 

Mortgage Interest Deductions Provisions From the 2017 Federal Tax Legislation

Check out the Tax Cuts and Jobs Act - What it Means for Homeowners and Real Estate Professionals page for information on the major provisions affecting current and prospective homeowners, commercial real estate, and real estate professionals.

What Are the Limits on Mortgage Tax Interest Deductions?

  • The final bill reduces the limit on deductible mortgage debt to $750,000 for new loans taken out after 12/14/2017. Current loans of up to $1 million are grandfathered and are not subject to the new $750,000 cap. Neither limit is indexed for inflation.
  • Homeowners may refinance mortgage debts existing on 12/14/2017 up to $1 million and still deduct the interest, so long as the new loan does not exceed the amount of the mortgage being refinanced.
  • The final bill repeals the deduction for interest paid on home equity debt through 12/31/2025. Interest is still deductible on home equity loans (or second mortgages) if the proceeds are used to substantially improve the residence.
  • Interest remains deductible on second homes, but subject to the $1 million / $750,000 limits.


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Mortgage Interest Deduction allows homeowners to reduce their taxable income by deducting the amount paid in mortgage interest. Learn how it can benefit housing and homeownership, check out the IRS rules and guidelines, download ebooks explaining the law, and find out why there is opposition to it.

Mortgage Interest Deduction Basics

What Is the Mortgage Interest Deduction? A Guide for Homeowners and Investors (Millionacres, Sep. 3, 2021)

As noted above, unfortunately, investors can only take this tax deduction if they use their second home as a rental property. If you have a standard investment property, you can still deduct your interest payment as a business expense if you file a Schedule E at the end of the tax year.

What to Know About Tax Deductions for Homeowners In 2021 (Forbes, Aug. 10, 2021)

I am a financial planner in Los Angeles, so most people I speak to locally will still fall into the pool of homeowners who can deduct their mortgage interest. For much of the country, the answer is – "It depends."

Mortgage Interest Deduction (Investopedia, Jun. 21, 2021)

The mortgage interest deduction can only be taken if the homeowner’s mortgage is a secured debt, meaning they have signed a deed of trust, mortgage, or a land contract that makes their ownership in qualified home security for payment of the debt and other stipulations.

You May Be Able to Deduct Mortgage Interest on Your 2020 Taxes, but That Doesn’t Mean You Should (NextAdvisor, May 11, 2021)

But thanks to the 2017 Tax Cuts and Jobs Act, itemizing makes less sense for a greater number of Americans. That’s because the law boosted the standard deduction amount, increasing the number of people it makes sense for. It also lowered the threshold for what mortgages allow a mortgage interest tax deduction. For mortgages that originated before Dec. 16, 2017, you can deduct interest on loans of up to $1 million. For loans that originated after that, you can deduct interest on loans up to $750,000.

What REALTORS® Need to Know About the New Tax Law (National Association of REALTORS®, Feb. 25, 2019)

The new tax law has now lowered that $1 million limit to $750,000, but only for new mortgages taken out after December 14, 2017. For mortgage loans existing on that date, the limit is still $1 million. And interest on these "grandfathered" mortgages will remain deductible as long as the homeowner keeps the loan. Such loans can even be refinanced with the deduction retained, so long as the original term of the loan and the balance owed on the date of refinancing is not increased.

How Does the Mortgage Interest Deduction Benefit Housing and Homeownership?

8 Reasons to Buy a Home (The Balance, Aug. 18, 2021)

Homeownership is a superb tax shelter, and tax rates favor homeowners. Sometimes, the mortgage interest deduction can overshadow the desire for the pride of ownership as well. As long as your mortgage balance is smaller than the price of your home, mortgage interest is fully deductible on your tax return.

7 Tax Benefits of Owning a Home: a Complete Guide for Filing This Year (realtor.com®, Feb. 1, 2021)

The ability to deduct the interest on a mortgage continues to be a big benefit of owning a home. And the more recent your mortgage, the greater your tax savings.

Why Homeownership Should Continue to Be Incentivized by Our Federal Tax System (Rosen Consulting Group/National Association of REALTORS®, Feb. 2020)

As homeowners build equity the increased wealth leads to greater consumer spending that spurs business activity and provides a positive multiplier effect that creates jobs and income throughout the economy. Every 10% increase in total housing market wealth would translate to approximately $147 billion in additional consumer spending, or 0.8% of GDP, as well as billions of dollars in new federal tax revenue.

Why Is There Opposition to the Mortgage Interest Deduction?

In This Housing Boom, Mortgages are for Losers (Bloomberg, Aug. 24, 2021)

The policy change that's needed is something that makes ownership more attractive for individuals than for investors. The mortgage interest deduction won't do it. It's a policy tool that's not particularly relevant for the buyers and homes in question because interest rates are already so low, and because the selling price of affordable homes is generally below the threshold for mortgage interest deductions. Plus, it's a policy tool that's out of favor with legislators.

Misdirected Housing Supports: Why the Mortgage Interest Deduction Unjustly SubsidizesHigh-Income Households and Expands Racial Disparities (National Low Income Housing Coalition/Brandeis, May 2021)

Eligibility for the MID is selective and exclusionary. A household needs to own a home with a documented mortgage with a lender, excluding renters and homeowners without mortgages. Under these eligibility criteria, the MID advantages white households who have consistently higher rates of
homeownership than households of color. The historic high homeownership gap between white and Black/Latino households further exacerbates the inequitable racial distribution of the MID. The MID aids households that have already experienced many advantages throughout the past century.

The Contradiction at the Heart of Housing Policy (Sightline Institute, Feb. 25, 2021)

Finish off the mortgage interest deduction and the state and local tax deduction by phasing them out over a decade—or making them moot by further raising the standard deduction.

The Mortgage Interest Deduction: Tax Subsidy for The Rich Must Go (Sacramento Observer, Jan. 22, 2021)

Households with at least six-figure incomes receive more than four-fifths of the total value of mortgage interest and property-tax deductions. And it doesn’t stop there: The mortgage interest deduction applies to second homes and/or vacation homes too! So the rich get away with deducting up to $2 million yearly from their state taxable income. Even the Trump administration thought that the MID cap was excessive and capped the federal deduction at $750,000 per home.

Rules, Forms, & Guidelines from the IRS on Mortgage Interest Tax Deduction

Topic No. 504 Home Mortgage Points (Internal Revenue Service, Mar. 8, 2021)

The term points is used to describe certain charges paid to obtain a home mortgage. Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. Points are prepaid interest and may be deductible as home mortgage interest, if you itemize deductions on Schedule A (Form 1040), Itemized Deductions. If you can deduct all of the interest on your mortgage, you may be able to deduct all of the points paid on the mortgage.

Publication 530 (2019), Tax Information for Homeowners (Internal Revenue Service, Mar. 1, 2021)

Part I contains general information on home mortgage interest, including points and mortgage insurance premiums. It also explains how to report deductible interest on your tax return. Part II explains how your deduction for home mortgage interest may be limited. It contains Table 1, which is a worksheet you can use to figure the limit on your deduction.

Home Mortgage Interest Deduction: Publication 936 (For Use in Preparing 2019 Returns) (Internal Revenue Service, Feb. 12, 2021)

Limits on home mortgage interest. Your deduction for home mortgage interest is subject to a number of limits. If one or more of the following limits applies, see Pub. 936 to figure your deduction. Also see Pub. 936 if you later refinance your mortgage or buy a second home.

eBooks & Other Resources


The following eBooks and digital audiobooks are available to NAR members:

The Complete Idiot's Guide to Mortgages (eBook)

The Everything Guide to Mortgages Book (eBook)

Mortgage Confidential (eBook)

Mortgage Myths (eBook)

Mortgages 101 (eBook)

Mortgages For Dummies® (eBook)

How to Invest in Real Estate & Pay Little or No Taxes (eBook)

The Home Mortgage Book (eBook)

The Mortgage Answer Book: Practical Answers to More Than 150 of Your Mortgage and Loan Questions (eBook)

The Mortgage Encyclopedia: The Authoritative Guide to Mortgage Programs, Practices, Prices and Pitfalls (eBook)

Mortgage Management for Dummies (Audiobook)

The Tax Lady's Guide to Beating the IRS and Saving Big Bucks on Your Taxes (eBook)

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