The Mortgage Interest Deduction: How It Works in 2024
The mortgage interest deduction is the most famous tax break in the US. It's also far less powerful since 2018 — and most homeowners no longer benefit at all.
The current rules (2018–2025)
- Interest on up to $750,000 of acquisition debt is deductible ($375K if MFS)
- Mortgages taken before December 15, 2017 are grandfathered at $1,000,000
- Must be 'acquisition debt' — used to buy, build, or substantially improve the home that secures it
- Up to two qualified residences (primary + one second home)
- You must itemize on Schedule A
Why most homeowners get zero benefit
The standard deduction is $29,200 MFJ (2024). On a $400K mortgage at 7%, you might pay ~$28K of interest year one. Add $10K SALT (capped) + charity — many homeowners still fall short of the standard. Result: itemizing saves nothing.
HELOCs and home equity loans
Deductible only if proceeds were used to buy, build, or substantially improve the home that secures the loan. HELOC used to pay off credit cards or buy a car: not deductible.
Refinances and cash-outs
Refinancing: the original purchase money trace continues. Cash-out portion is deductible only if used for home improvements. Original mortgage size before refi caps the deductible portion if you originally borrowed under the higher pre-2018 limit.
Points and PMI
- Points on a purchase mortgage: fully deductible in year paid (subject to a few requirements). On a refi: amortized over the loan term.
- PMI deduction expired and has not been renewed for 2022+ tax years.
What about property tax?
Property tax is deductible — but inside the $10,000 SALT cap shared with state income/sales tax. See our SALT cap guide.
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