Is Mortgage Interest Tax Deductible?
It is deductible if you itemize — and for many borrowers the standard deduction is still larger, which means the benefit is zero.
Key takeaways
- Mortgage interest on a qualified residence is deductible only if you itemize.
- Itemizing helps only by the amount your itemized total exceeds the standard deduction — that excess, times your marginal rate, is the real benefit.
- Interest is limited to the debt used to buy, build or substantially improve the home, subject to the acquisition-debt cap.
- State and local taxes are capped, which is why many borrowers with large property-tax bills still cannot itemize.
- The benefit shrinks every year as the loan amortizes and the interest portion of each payment falls.
Short answer: yes, interest on a qualified home loan is deductible — but only as an itemized deduction. If your itemized deductions total less than the standard deduction, your mortgage produces no federal tax saving at all. That is the case for a large share of homeowners.
The rule in one paragraph
You may deduct interest on acquisition debt — money borrowed to buy, build or substantially improve a first or second home that secures the loan — up to the statutory cap. Loans taken out after 15 December 2017 are subject to a $750,000 acquisition-debt limit ($375,000 if married filing separately); older loans are generally grandfathered at $1,000,000. The authority is IRS Publication 936.
Why the deduction is often worth nothing
Every filer chooses the larger of the standard deduction or their itemized total. Itemizing only pays when interest plus state and local taxes (capped) plus charitable gifts plus other deductions exceeds that standard amount. The benefit is not your interest times your tax rate. It is the *excess over the standard deduction* times your marginal rate.
| Situation | Itemized total | Result |
|---|---|---|
| Modest loan, capped SALT, no charity | Below standard deduction | No benefit |
| Large loan, high state tax, some charity | Above standard deduction | Benefit on the excess only |
| Early years of a large loan | Well above | Largest benefit, shrinks each year |
The SALT cap is usually the deciding factor
State and local income, sales and property taxes are deductible only up to the cap in force for the tax year. In high-property-tax states this cap does more to determine whether you itemize than the mortgage itself. Enter the cap that applies to your filing year in the tax settings panel of the optimizer rather than assuming a number.
It shrinks every single year
A fixed-rate mortgage front-loads interest. In year one of a $450,000 loan at 6.6%, nearly $29,600 of the payments are interest. By year ten it is closer to $25,000, and by year twenty it is under $16,000. A deduction that clears the standard deduction today may stop clearing it in a few years, without anything else changing.
What else can go in the itemized column
- Property taxes, within the SALT cap
- Points paid on a purchase, generally deductible in the year paid; points on a refinance are normally amortized over the loan term
- Mortgage insurance premiums, subject to the income phase-out
- Charitable contributions and qualifying medical expenses
Worked example: does itemizing help?
- Purchase price
- $500,000
- Loan amount
- $450,000
- Rate
- 6.6%
- Down payment
- 10%
- Holding period
- Year 1 of the loan
- Tax assumptions
- Married filing jointly, SALT capped, no charitable gifts modelled
- Year 1 mortgage interest≈ $29,600
- State and local taxes claimedCapped amount only
- Itemized total vs standard deductionCompare in the calculator
- Federal benefitMarginal rate × the excess, not × the interest
The interest figure comes from a standard amortization schedule for a $450,000 30-year loan at 6.6%.
Frequently asked questions
- Is mortgage interest deductible if I take the standard deduction?
- No. Mortgage interest is an itemized deduction. If you take the standard deduction, the interest produces no federal tax saving.
- Is interest on a second home deductible?
- Generally yes, for one additional qualified residence, and the acquisition-debt cap applies across both homes combined. See IRS Publication 936 for the qualified-residence tests.
- What about a cash-out refinance?
- Only the portion of the new loan that represents acquisition debt — the original balance plus money spent to substantially improve the home — generates deductible interest. Cash taken out for other purposes does not.
Sources
- Internal Revenue Service: Publication 936, Home Mortgage Interest Deduction — accessed 2026-07-28
- Internal Revenue Service: Topic no. 501, Should I itemize? — accessed 2026-07-28
- Internal Revenue Service: Publication 530, Tax Information for Homeowners — accessed 2026-07-28
Educational content only. This is not a loan offer, and your actual terms depend on your lender, credit profile and property.
Tax outcomes depend on your full return, itemization status, loan purpose and property use. This is not tax advice — confirm with a tax professional.