Mortgage Interest Deduction Calculator

IRC §163(h)(3) caps deductible interest at the ACQUISITION INDEBTEDNESS cap. For mortgages originated AFTER December 15, 2017: up to $750,000 of mortgage principal ($375,000 MFS) — TCJA §11043, made permanent by OBBBA §70108's omission of any expiration (previously scheduled to sunset after 2025). Mortgages incurred on or before Dec 15, 2017 are grandfathered at the older $1,000,000 cap ($500,000 MFS); so is a purchase closed by March 31, 2018 under a written binding contract signed before Dec 15, 2017. The cap applies to the COMBINED balance of first AND second mortgages on your primary plus secondary residences. Interest on debt above the cap is non-deductible — you don't lose the deduction entirely, just the over-cap portion.

With OBBBA's larger standard deductions ($15,750 single, $31,500 MFJ for 2025; rising to $16,100 / $32,200 for 2026), many homeowners find the standard exceeds total itemized deductions. Itemizing tends to win for: large mortgages ($400k+), high property taxes ($8k+), residents of high-tax states (NY, CA, NJ, OR), significant charitable giving, and/or major medical expenses above the 7.5% AGI floor. Since TCJA far fewer filers itemize.

ACQUISITION DEBT is borrowed to "acquire, construct, or substantially improve" your primary or secondary residence and is secured by that residence (§163(h)(3)(B)). Original purchase money, construction loans, and home-improvement HELOCs all qualify. HOME-EQUITY DEBT — a HELOC or cash-out refinance whose proceeds are used for ANYTHING ELSE (debt consolidation, cars, vacations) — is NOT deductible since TCJA §11043 (2018). The use-of-proceeds matters more than the loan type. A HELOC used to add a master bedroom = acquisition debt = deductible. The same HELOC used to pay off credit cards = home-equity debt = not deductible.

Mortgage interest is a SEPARATE itemized deduction from SALT (state and local taxes) — there's no shared cap. You can deduct full mortgage interest within the $750,000 acquisition cap AND deduct SALT (state income + property tax) within the OBBBA $40,000 cap ($20,000 MFS, 2025), phasing to $10,000 above $500,000 MAGI. So a homeowner can stack: mortgage interest deduction (large, uncapped within $750k) + SALT ($40,000 max) + charitable + medical above 7.5% AGI floor. The SALT cap only governs property + state income/sales tax — not mortgage interest.

Yes, IF the loan proceeds are used to "buy, build, or substantially improve" the home that SECURES the loan (post-TCJA §163(h)(3)(F) rules). Cash-out HELOC for home renovation = deductible (within the combined $750,000 acquisition cap). HELOC for credit card payoff, college tuition, or vacation = NOT deductible. Keep contractor invoices and project receipts as substantiation. The /heloc-deduction-calculator/ models the use-of-proceeds split.

Only the interest attributable to the FIRST $750,000 of principal is deductible. With a $1M loan at 7% in year 1: total interest ~$70,000; deductible portion = $70,000 × ($750k / $1M) = $52,500. The remaining $17,500 of interest is non-deductible. Reported on Schedule A line 8a (deductible portion) — the calculation is done by IRS Pub 936 Table 1 worksheet. For grandfathered pre-2017 loans, use the $1M cap instead.

If you refinance a PRE-Dec 15, 2017 mortgage, the new loan retains the $1M grandfathered cap up to the ORIGINAL balance you had when refinancing. Any cash-out portion above the original balance is treated as NEW debt subject to the $750k cap. Example: you owe $700k on a pre-2017 mortgage and refinance it to $700k → the whole new loan keeps the older cap. Refinance it to $900k and use the extra $200k for something other than the home → only the $700k is home acquisition debt. If the extra $200k is spent improving the home, it counts as new debt, but the $750k limit is reduced by the $700k of older debt, so only $50k of it adds to the total (Pub 936). The older treatment also lasts only for the remaining term of the loan you refinanced.

Yes, but as a BUSINESS EXPENSE on Schedule E (Rental Income), not as Schedule A itemized. Rental mortgage interest reduces taxable rental income dollar-for-dollar — fully deductible regardless of the §163(h)(3) acquisition cap (which only governs Schedule A primary/secondary residence interest). Rental losses subject to §469 passive activity loss rules: deductible against passive income, up to $25,000 against ordinary income (phasing out $100-150k AGI), excess suspended and carried forward.

A "qualified residence" under §163(h)(5) means your principal residence + ONE additional home of your choosing. If you rent that home out at any time, you must also use it personally more than the greater of 14 days or 10% of the days rented; a home you never rent needs no day count. Interest on that combination of two homes within the $750,000 aggregate cap is deductible. Vacation homes rented out part-time without personal use don't qualify as "qualified residences" and use Schedule E business-deduction rules instead.

Yes — "points" (loan discount, origination fees) on the PURCHASE of your primary residence are fully deductible in the year paid under §461(g)(2), as long as: (1) the loan is on your primary residence, (2) points were customary in your area, (3) you paid them with your own funds (not financed). For REFINANCING, points generally must be spread over the life of the new loan — e.g., $3,000 points on a 30-year refi = $100/year deductible. If the loan ends early (payoff, sale), the remaining balance is deductible in that year, unless you refinanced with the same lender, in which case it is spread over the new loan.

PMI/MIP deduction expired at the end of 2021 and was NOT deductible for 2022-2025. OBBBA §70108 restored it PERMANENTLY starting tax year 2026: mortgage insurance premiums (private PMI, FHA/VA/USDA MIP) on contracts issued after 2006 are treated as deductible qualified residence interest within the $750,000 acquisition-debt cap. The deduction phases out 10% for every $1,000 (or part) that AGI exceeds $100,000 ($50,000 MFS, phased 10% per $500) — the same phaseout structure as the pre-2022 rule. For 2025 returns (filed in 2026), PMI is still NOT deductible; the restoration only applies to tax years beginning after Dec 31, 2025.

FORM 1098 is the IRS information return your mortgage lender sends YOU each January, reporting box 1 (mortgage interest paid), box 2 (outstanding mortgage principal), and box 3 (origination date — critical for the $750k vs $1M cap determination). SCHEDULE A line 8a is where you report the deductible portion of that interest on your individual return. If your loan exceeds $750k/$1M, you compute the deductible portion via the IRS Pub 936 worksheet rather than copying the 1098 number verbatim.

If multiple people share legal ownership AND each pays some of the mortgage, each can deduct their actual paid portion. The IRS treats the Form 1098 recipient as the primary, but unmarried co-borrowers who share a mortgage on which only one received the Form 1098 each deduct their own share and attach a statement explaining the split (Pub 936). For MFJ, just file jointly — no allocation needed. For MFS, the cap is halved ($375k) per spouse.