Mortgage Tax Deduction Calculator

Some homeowners have at least one thing to look forward to during tax season: deducting mortgage interest. This includes any interest you pay on a loan secured by your primary residence or second home. This means a mortgage, a second mortgage, a home equity loan or a home equity line of credit (HELOC).

What is the mortgage tax deduction?

The mortgage interest deduction is a tax incentive for homeownership. It lets some taxpayers write off some of the interest charged by their home loan. The deduction once was a staple of homeownership, but it has grown less generous amid changes to the law and an era of super-low mortgage rates. Homeowners who locked in 3 percent rates during the pandemic are unlikely to spend enough on interest payments to meet the deduction thresholds.

Who qualifies for this deduction?

How much interest can I claim?

Most homeowners can deduct all of their mortgage interest. The Tax Cuts and Jobs Act (TCJA), which is in effect from 2018 to 2025, allows homeowners to deduct interest on home loans up to $750,000. For taxpayers who use married filing separate status, the home acquisition debt limit is $375,000.

For mortgages that were taken out before December 16, 2017, the limits are higher. The same goes for borrowers who were under a binding contract by the December 16 deadline and closed before April 1, 2018. Those borrowers can deduct interest on loans up to $1 million or $500,000 for married, filing separately.

Changes and rules

The mortgage interest deduction is a political creation, and that means it’s subject to change. Key aspects of the tax break have changed over time.

2018 changes to the tax code

Beginning in 2018, the limits on qualified residence loans were lowered. Now, couples filing jointly may only deduct interest on up to $750,000 of qualified home loans, down from $1 million in 2017. For married taxpayers filing separate returns, the cap is $375,000; it was previously $500,000.

These limits include any combination of qualified loans, such as mortgages — including the popular 30-year mortgage — home equity loans and HELOCs.

For example, if you have a first mortgage that is $300,000 and a home equity loan that’s $200,000, all the interest paid on both of those loans may be deductible since you didn’t exceed the $750,000 cap.

If you took out a mortgage or a home equity loan/HELOC or both on or before December 15, 2017, you can still deduct the interest on up to $1 million in loans.

Home equity loans and HELOC rules

The new tax law also ended the deduction for interest on home equity indebtedness until 2026, unless one condition is met: You use HELOCs or home equity loans to pay for home improvements.

In other words, if you didn’t use your home equity loan to fix your roof, add another bedroom or make other upgrades to your residence, then that interest would not be tax deductible.

Remember to keep records of your spending on home improvement projects in case you get audited. You may even need to go back and reconstruct your spending for second mortgages taken out in the years before the tax law was changed.

LOAN TYPE PURCHASE RATES REFINANCE RATES
The table above links out to loan-specific content to help you learn more about rates by loan type.
30-Year Loan 30-Year Mortgage Rates 30-Year Refinance Rates
20-Year Loan 20-Year Mortgage Rates 20-Year Refinance Rates
15-Year Loan 15-Year Mortgage Rates 15-Year Refinance Rates
10-Year Loan 10-Year Mortgage Rates 10-Year Refinance Rates
FHA Loan FHA Mortgage Rates FHA Refinance Rates
VA Loan VA Mortgage Rates VA Refinance Rates
ARM Loan ARM Mortgage Rates ARM Refinance Rates
Jumbo Loan Jumbo Mortgage Rates Jumbo Refinance Rates