Homeowners can potentially deduct mortgage interest on up to $750,000 of loan principal, state and local property taxes (subject to a combined SALT cap), and mortgage points paid at closing. To claim most of these deductions, you must itemize on Schedule A rather than take the standard deduction — and only the portion of itemized deductions that exceeds your standard deduction produces a real tax benefit.
This is general information, not tax advice — consult a qualified tax professional about your specific situation.
Mortgage Interest Deduction
The mortgage interest deduction is the largest tax benefit most homeowners have access to. If you took out a mortgage on or after December 16, 2017, you may deduct interest on up to $750,000 of qualified residence debt ($375,000 if married filing separately). This limit applies to the combined balance across your primary residence and a second home.
For mortgages originated before December 16, 2017, a higher limit of $1 million ($500,000 if married filing separately) applies under prior-law grandfathering rules.
The deduction covers interest paid on loans used to buy, build, or substantially improve a qualified residence. Your lender will send a Form 1098 each January reporting the mortgage interest you paid during the prior tax year. That figure goes on Schedule A, line 8a or 8b depending on your situation.
Key points:
- Interest on home equity loans or lines of credit is only deductible if the borrowed funds were used to buy, build, or substantially improve the home securing the loan. Using a HELOC for personal expenses (vacations, debt consolidation) does not qualify.
- The $750,000 limit is a debt cap, not an interest cap. If your loan balance is below $750,000, all qualifying interest is potentially deductible.
- Publication 936 on the IRS website contains the full rules and worksheet for calculating deductible interest when a loan exceeds the applicable limit.
State and Local Taxes (SALT) — Property Taxes
The SALT deduction lets homeowners deduct certain state and local taxes on Schedule A. For homeowners, the most relevant component is real property tax — the annual tax assessed on your home by your local government.
The deduction is subject to a combined cap that covers all state and local income taxes (or sales taxes, if you elect that), plus property taxes. Under current law:
- For tax year 2025: the SALT cap is $10,000 ($5,000 if married filing separately).
- For tax year 2026: Congress increased the cap to $40,400 ($20,200 if married filing separately), phasing down for modified adjusted gross incomes above $500,000. The cap is scheduled to grow 1% annually through 2029, then revert to $10,000 starting in 2030.
Property taxes are only deductible in the year they are actually paid, not the year they accrue. Taxes paid through an escrow account are deductible when the servicer remits them to the taxing authority — your year-end mortgage statement typically shows the amount paid.
Taxes that do not qualify include:
- Transfer taxes or stamp taxes paid when you purchased the property
- Homeowner association fees
- Special assessments for local improvements (new sidewalks, sewer lines) that increase your property's value
Mortgage Points
Points (also called loan origination fees or discount points) are prepaid interest you pay at closing to reduce your loan's interest rate. One point equals 1% of the loan amount.
Primary home purchase: Points paid to obtain a mortgage for your principal residence can generally be deducted in full in the year paid, provided you meet the requirements set out in IRS Topic No. 504. Among the key requirements: the loan must be secured by your main home, the points must be a normal business practice in your area, and the amount must not exceed what is generally charged locally.
Refinance or second home: Points paid to refinance a loan, or to obtain a mortgage on a second home, must generally be deducted ratably over the life of the loan rather than all at once. For example, if you paid $3,600 in points on a 30-year (360-month) refinance, you can deduct $10 per month, or $120 per year.
When you sell or pay off the loan early, any undeducted points can be deducted in that final year.
What Homeowners Cannot Deduct
Several costs that feel like "tax" or "interest" are not deductible:
| Item | Why It Does Not Qualify |
|---|---|
| Homeowner's insurance premiums | Personal expense; not a tax or interest payment |
| Principal paid on the mortgage | Repayment of loan balance, not interest |
| HOA fees | Private dues, not a government tax |
| Home depreciation (primary residence) | Only available to business or rental use portions |
| Title insurance | Closing cost treated as part of home basis, not current deduction |
| Moving expenses | Deductible only for active-duty military under current law |
| Utility bills | Personal living expenses |
Itemizing vs. the Standard Deduction
Most of the deductions described above are only available if you itemize deductions on Schedule A instead of taking the standard deduction. For tax year 2025, the standard deduction is:
- $15,750 — single filers
- $31,500 — married filing jointly
- $23,625 — head of household
You benefit from itemizing only when your total itemized deductions exceed your applicable standard deduction. For many homeowners — particularly those in early years of a mortgage when interest is highest, or those in high-property-tax states — itemizing can produce a larger deduction. For others, especially those with smaller loan balances or who live in low-tax states, the standard deduction may already exceed what they could itemize.
A useful check: add up your mortgage interest (Form 1098), allowable property taxes, and any other itemizable expenses (charitable contributions, unreimbursed medical costs above the 7.5% threshold, etc.). If that total clears your standard deduction, itemizing is worth exploring with a tax professional.
| Deduction | Limit / Cap | Notes |
|---|---|---|
| Mortgage interest | $750,000 of debt (loans after 12/16/2017); $1M for earlier loans | Both primary + second home combined; per IRS Pub. 936 |
| Property taxes (SALT) | $10,000 combined cap for 2025; $40,400 for 2026 | Includes state/local income or sales tax + property tax |
| Mortgage points (purchase) | Full deduction in year paid (if requirements met) | See IRS Topic No. 504 for qualifying conditions |
| Mortgage points (refinance) | Ratably over loan term | Remaining points deductible when loan ends |
| Home equity interest | Deductible only if funds used to buy/build/improve home | Non-qualifying use (personal expenses) not deductible |
Frequently Asked Questions
Q: Do I have to itemize to claim the mortgage interest deduction? Yes. The mortgage interest deduction is an itemized deduction claimed on Schedule A. It is not available to taxpayers who take the standard deduction. General information only — consult a qualified tax professional for guidance specific to your return.
Q: Can I deduct property taxes if my mortgage servicer pays them from escrow? Generally yes, for the tax year in which your servicer actually remits the taxes to the government. Your year-end mortgage statement should show the property taxes disbursed from escrow. This is general information, not tax advice — consult a qualified tax professional.
Q: My mortgage is $900,000. Can I still deduct any interest? You may be able to deduct the interest attributable to the first $750,000 of the loan (for loans originated after December 16, 2017). IRS Publication 936 includes a worksheet for calculating the deductible portion when your loan exceeds the limit. Consult a qualified tax professional for your specific calculation.
Q: I paid points to refinance my mortgage. Can I deduct them all this year? Points paid on a refinance must generally be deducted ratably over the life of the loan rather than in full the year paid. The rules differ from points paid on a home purchase; see IRS Topic No. 504 for details. This is general information, not tax advice — consult a qualified tax professional.
Q: Does selling my home affect these deductions? In the year of sale, you can deduct mortgage interest and property taxes paid up to the closing date. Any undeducted points from a refinance can generally be deducted in full in the year the loan is paid off. Additional rules around home sale exclusions are covered in IRS Publication 523. Consult a qualified tax professional.
Q: Where can I learn more? The IRS publishes free, authoritative guidance: Publication 936 covers home mortgage interest; Topic No. 503 covers deductible taxes; Topic No. 504 covers points. For a broader look at itemizing, see our guide at /newsroom/standard-deduction-vs-itemizing-2026, and for deductions homeowners sometimes overlook, visit /newsroom/commonly-missed-tax-deductions. All deduction questions are also addressed in our /newsroom library.
This is general information, not tax advice — consult a qualified tax professional about your specific situation.