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 §70120's omission of any expiration. Mortgages BEFORE Dec 15, 2017 are grandfathered at the older $1,000,000 cap ($500,000 MFS). 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. Per IRS Statistics of Income, only ~10% of filers itemize post-TCJA — vs ~30% pre-TCJA.

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. The IRS audits HELOCs for use-of-proceeds via bank records when issued large. 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: $800k pre-2017 mortgage refinanced to $700k flat → keeps $1M grandfather cap. Same loan refinanced with $200k cash-out (now $900k loan) → $700k grandfathered + $200k new debt = $900k total, but the cap is min($1M grandfather for the $700k, $750k new-debt cap for the cash-out) → effectively all interest deductible up to $900k.

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)(4) means your principal residence + ONE additional home of your choosing (must be used personally >14 days OR 10% of rental days, whichever greater). 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 must be AMORTIZED over the life of the new loan — e.g., $3,000 points on a 30-year refi = $100/year deductible. If you refi or sell before the loan term ends, remaining unamortized points are deductible in the final year.

PMI deduction expired at the end of 2021 under the Build Back Better non-passage. Currently NOT deductible. Pre-2022: PMI was deductible as itemized when AGI <$100k (phasing out to $109k). Congress could restore it in future tax legislation but no bill has been enacted through 2026. FHA mortgage insurance premium (MIP) follows the same treatment.

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 can each deduct using a paid-by-me allocation note on Schedule A. For MFJ, just file jointly — no allocation needed. For MFS, the cap is halved ($375k) per spouse. Co-borrowers who divorce mid-year split interest by months of payment responsibility.