How much mortgage interest can you deduct on your taxes?


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Mortgage interest may be one of the biggest deductions you can make to significantly reduce your taxable income.  

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Everyone wants to save on taxes, and one of the best ways is to maximize every possible deduction. 

The mortgage interest deduction used to be a mainstay for consumers, but the past few years have changed that. Some homeowners may be better off not claiming that deduction.

You can determine how much to deduct by using a tax preparation software like E-file here. 

If you do want to claim it, read below to figure out how it works – and if it makes sense for you.

How to deduct mortgage interest on federal tax returns

When you file taxes, you can take the standard deduction or the itemized deduction. In 2022, the standard deduction is $25,900 for married couples filing jointly and $12,950 for individuals. The standard deduction is $19,400 for those filing as head of household. 

The mortgage interest deduction is only available to those who itemize their deductions. If you take the standard deduction, you won’t be able to deduct your mortgage interest. And since the standard deduction is so high, most homeowners are better off not itemizing their deductions.

In general, you should only itemize your deductions if the total amount exceeds the standard deduction. You can do the math yourself or hire an accountant if you want more assistance.

You can also deduct interest on a home equity loan or line of credit, as long as the home is listed as the collateral. If another piece of property is listed as collateral, then you may not be able to deduct the interest. 

Depending on the size of your mortgage, deducting mortgage interest may be one of the biggest deductions you can make and can significantly reduce your taxable income.  

Tax preparation software can easily help you determine how much to deduct. Get your taxes done right and your maxim refund guaranteed with TurboTax here. 

How to deduct mortgage interest on state tax returns

If your state charges income tax, you may be able to deduct your mortgage interest on your state tax returns. However, how much you can deduct and any other limits depends on your specific state’s rules. 

If you want to deduct the interest, you can use the figures from the 1098 form sent by your mortgage company. If you don’t receive a 1098 form, that may mean that you paid less than $600 in interest. However, you should still be able to deduct the mortgage interest. You will just have to manually calculate the amount of interest paid in total.

Some states may have a limit on how many properties you can deduct the mortgage interest for, while others states will let you deduct the interest on all your homes. 

How to qualify for the mortgage interest deduction

Only homeowners whose mortgage debt is $750,000 or less can deduct their mortgage interest. If you are married filing separately, you can only deduct mortgage interest if the mortgage debt is $375,000 or less.

The limit used to be $1 million, but that changed after the passage of the 2017 Tax Cuts and Jobs Act. 

Deducting mortgage interest on second homes

If you have two homes, you can still deduct the mortgage interest on your federal taxes on a second home. To qualify, the property must be listed as collateral on the loan. You can only deduct interest on one home besides your primary property. 

However, the rules are different if the second home is a rental property. If that’s the case, you can only take the deduction if you live in the property for 14 days or for 10% of the time that it is rented. If you never live in it, then it is exclusively treated as a rental property so you can’t take the mortgage interest deduction. 

Still have more questions about tax deductions? The experts at H&R Block can help you. 

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