Mortgage Interest Deduction Limits Explained

The mortgage interest deduction allows qualifying homeowners to subtract the interest they paid on mortgage loans from their taxable income—but the amount you can deduct depends on when you took out the loan and how much you borrowed. Before 2017, homeowners could deduct interest on loans up to $1 million; since the Tax Cuts and Jobs Act, the cap dropped to $750,000 for most new mortgages.

The 2017 Tax Law Change

The Tax Cuts and Jobs Act, signed in December 2017, cut the mortgage interest deduction limit roughly in half—from $1 million to $750,000—for mortgages originated after December 15, 2017. This was a deliberate choice by Congress to offset revenue lost to corporate tax cuts and a wider rebalancing of deductions in the individual code.

Critically, homeowners with existing mortgages taken out before that date were grandfathered in. If you have a $900,000 mortgage signed in 2010, you may still deduct interest on the full amount. Only new loans capped at $750,000 of principal apply the lower limit. This two-tier system remains in place today.

Why Caps Matter: An Example

The cap operates on the principal balance of the loan, not the interest rate or annual payment. Say two homeowners buy identical $900,000 houses in 2024. One puts 20% down, borrowing $720,000; the other puts 10% down, borrowing $810,000. Both qualify for full deductions because they’re below the $750,000 limit. A third buyer finances $850,000 and may only deduct interest on $750,000—the top $100,000 of interest payments don’t reduce their taxable income.

Over a 30-year loan at 6.5% interest, that uncapped $100,000 represents roughly $220,000 in total interest payments over the life of the loan, yet only about $168,000 can be deducted (the amount attributable to the deductible $750,000 balance).

Itemizing vs. the Standard Deduction

The mortgage interest deduction only helps if you itemize deductions on Schedule A rather than taking the standard deduction. Because the standard deduction has also risen (to $14,600 for single filers and $29,200 for married couples in 2024), fewer taxpayers benefit from itemizing at all, even with a mortgage.

A single homeowner with $9,000 in annual mortgage interest has no incentive to itemize unless their other deductions—property tax, charitable donations—push them above the standard deduction threshold. In high-tax states with large mortgages, itemizing still makes sense. In lower-tax or rural areas, especially with smaller loans, the standard deduction often wins.

Married Couples and Shared Ownership

Married couples filing jointly can claim one combined $750,000 limit across all mortgages they jointly own. If each spouse owned a property separately before marriage, each would have had an independent $750,000 limit, but upon filing jointly they pool into one. If your combined mortgages exceed $750,000, only interest on the first $750,000 is deductible.

Unmarried co-borrowers have no special rule—they follow the same $750,000 cap per property.

Home Equity Debt and HELOC Limits

The $750,000 limit applies to mortgages taken to buy or improve the home. Home equity lines of credit (HELOCs) and second mortgages taken for other purposes (debt consolidation, education, vacations) face a separate, tighter cap: interest on only $100,000 of home equity debt is deductible, regardless of the actual balance.

This asymmetry means a couple with a $750,000 primary mortgage and a $300,000 home equity line can deduct interest on the full primary mortgage but only on $100,000 of the HELOC, even though they own $1.05 million in home debt.

State and Local Tax Considerations

The mortgage interest deduction works at the federal level, but many states offer their own deductions or disallow it entirely. Some states conform to federal limits; others have different caps or no deduction at all. Additionally, state property tax deductions are now capped at $10,000 total under federal rules, which affects the appeal of itemizing in high-tax jurisdictions. A homeowner in California or New York may find that property taxes alone max out the $10,000 state and local tax (SALT) cap, leaving no room to benefit further from the mortgage deduction—a meaningful change post-2017.

Planning and Documentation

Lenders provide Form 1098 each year, detailing the mortgage interest paid. Keep records of the original loan documents to confirm whether your loan predates the December 2017 cutoff, especially if refinancing; a refinance can reset the grandfathering. If you refinance a pre-2017 loan, you typically keep the higher $1 million limit on the portion of the principal that was original debt, though the rules are nuanced. Consult a tax professional if you refi a grandfathered loan.

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