Mortgage interest deduction: A guide for the 2025 tax year

Each year, you have to file your tax return, outlining your income for the year and any tax deductions you’re eligible for. Deductions allow you to reduce your taxable income, reducing the amount of tax you pay.

The IRS offers several different deductions to homeowners, including the mortgage interest deduction. This deduction lets you reduce your taxable income by the amount you pay in mortgage interest, with a few limitations and restrictions, making homeownership more affordable.

What is the mortgage interest deduction?

The mortgage interest deduction is an incentive for homeowners that lets them deduct the cost of interest on their home loan from their taxable income. It is an itemizable deduction, reducing the amount of income tax that you owe.

Homeowners are allowed to take the deduction on their primary loan, some second mortgages, and loans for second homes, so long as they stay within IRS limits.

How much can you deduct?

The limit on how much you can deduct will depend on your filing status and when you got your mortgage.

For loans initiated prior to December 16, 2017, you can deduct interest charged on mortgage balances up to $1 million ($500,000 if married, filing separately.

The Tax Cuts and Jobs Act (TCJA) of 2017 reduced this limit to $750,000 ($375,000 if married, filing separately).

Who qualifies for the deduction?

To qualify for this deduction, you must own a home with a mortgage and file income taxes. You can deduct interest charged on loans up to the limit based on your filing status and when the loan was initiated.

Most mortgages qualify for the deduction, including a loan on your primary or second home. You may also be able to deduct interest on second mortgages if you use them for approved purposes. Keep in mind that the $1 million/$750,000 limit applies to the total balances of all of your mortgages, not to each loan individually.

What counts as mortgage interest?

In addition to the interest you pay each month with your loan payment, there can be other charges that count as mortgage interest that qualify for this deduction.

Mortgage points

When you get a mortgage, you may have the option to buy mortgage points, which reduce the interest rate of your loan. Typically, one point costs 1% of your loan amount and reduces the rate by 0.25%.

Mortgage points are a form of prepaid interest, so you can deduct the amount paid for points using the mortgage interest deduction. To qualify, you must pay the lender directly. In some cases, you can deduct the full amount paid in the year you paid for points. In others, you have to deduct the cost evenly over the life of the loan.

Late payment charges

So long as you aren’t paying a fee for a specific service from your lender, late payment fees are also considered a form of mortgage interest, making them eligible for a deduction.

Prepayment penalties

Some lenders, but not Rocket Mortgage^®, will charge a fee if you opt to pay your mortgage off ahead of schedule. If you pay a prepayment penalty related to early repayment of your loan, and not for a service or other additional cost, you can deduct it as mortgage interest.

Interest paid before selling your home

If you sell your home partway through the year, you’re still eligible to deduct the interest paid on your mortgage while you still have the loan.

Other deductions

No two situations are the same, so there are a lot of unusual or edge cases that can come up. For example, if you own a co-op or a timeshare, you may be able to deduct the interest on your portion of the mortgage. Renting your home can also complicate matters. Consider consulting a tax professional or reading through IRS Publication 936 for a full list of rules.

What doesn’t count as mortgage interest?

There are many common fees and costs that do qualify as mortgage interest for the purposes of this deduction, but many common expenses don’t. Some things that don’t qualify for this deduction include:

• Homeowners insurance: Homeowners insurance premiums don’t qualify.
• Mortgage insurance premiums: Mortgage insurance premiums, Department of Veterans Affairs (VA) funding fees, and U.S. Department of Agriculture (USDA) guarantee fees do not currently qualify as deductible mortgage interest for 2025.
• Other closing costs: Closing costs, like title fees, legal fees, recording fees, title insurance, agent commissions, home inspection costs, and credit check fees, don’t qualify.
• Moving expenses: Unless you’re an active-duty service member, you can’t deduct moving expenses from your taxes.
• Money spent while home buying: You can’t claim a deposit, down payment, or earnest money you spent during the home buying process.
• Interest on a reverse mortgage: You can’t get a deduction on a reverse mortgage because you don’t pay interest until you pay off the loan.

What loans qualify for a mortgage interest deduction?

Most mortgages qualify for the mortgage interest deduction. The primary restriction applies to second loans, such as home equity lines of credit or home equity loans.

• Mortgage interest for your main home: Your primary residence can be a house, co-op, apartment, condo, mobile home, houseboat, or other property. The property won’t qualify for the deduction if it doesn’t have basic living accommodations, including sleeping, cooking, and bathroom facilities. And it must be listed as collateral for the loan from which you’re deducting interest payments.
• Mortgage interest for a second home: You can use this tax deduction on a mortgage for a second home listed as collateral for that mortgage. If you rent out your second home, there’s another caveat. You must live there for more than 14 days or more than 10% of the days you rent it – whichever is longer. If you have more than one second home, you can deduct interest for only one.
• Mortgage interest for a home equity loan: A home equity loan is a lump sum borrowed from equity in a home. For your interest payments to qualify, you must use the money to buy, build, or “substantially improve” your home. Your interest payments won’t be eligible for the deduction if you use the money for anything else. Rocket Mortgage offers a Home Equity Loan you can consider fi you decide this is the right option for you.

The other limitation to keep in mind is that mortgage interest is deductible only if the home serves as collateral for the loan. For example, if you buy a rental property using a loan secured by a different home, you cannot take the deduction.

How to claim the mortgage interest deduction on your 2025 tax return

The mortgage interest deduction is an itemized deduction. That means that you’ll have to opt to itemize your deductions rather than take the standard deduction. The standard deduction for 2025 is $15,000 for single people ($30,000 for married, filing jointly) and will increase to $15,750 for single people ($31,500 for married, filing jointly) in 2026. That means itemizing only makes sense if your itemized deductions are greater than the standard deduction.

To take advantage of this deduction, follow these steps.

1.   Decide to itemize your deductions

To start, you’ll have to decide to itemize your deductions rather than take the standard deduction. That means researching and selecting from the different available deductions, such as charitable contributions, property taxes, medical expenses, and more.

Keep in mind that while many costs associated with homeownership are deductible, some, like home insurance, are not.

Then, you’ll have to fill out the various forms associated with each deduction and provide proof of your expenses, such as receipts, records, and other documents.

2.   Get your 1098 from your lender or mortgage servicer

Your lender should send you a Form 1098 during tax season each year. This Form details your mortgage payments and the amount you paid for interest and points. You’ll use that form to fill out your tax return and submit it to the IRS.

If you need help with the form or have not received it from your lender by mid-February, reach out to your loan servicer.

3. Select the correct tax forms for your situation

Depending on your financial situation and the deductions you want to take, you’ll need to use different tax forms.

If you’re itemizing deductions, you’ll want to use a standard Form 1040 and add Schedule A, which lists itemized deductions to it.

You may also need to submit Schedule E or Schedule C. Schedule E is for interest paid on rental properties, while Schedule C applies if you use your house as a home office. Mortgage interest can be listed as a business expense on either of these forms.

4.  Complete and file your tax forms

Once you have all of your documents together, you’ll need to fill out and submit your tax forms.

That means entering your mortgage interest amount from Form 1098 on Schedule A of your tax return under itemized deductions. You can add any other costs, such as mortgage points, that count as deductible.

Then, fill out the rest of Schedule A with other itemizable deductions, like state and local taxes or medical expenses.

Then, take a moment to add up all the deductions and ensure the total is greater than the standard deduction.

If you have a mortgage on a rental property or home used for business, you’ll instead include the cost of interest on Schedules E or C, respectively.

Finally, attach all of these Schedules to your Form 1040 and file electronically or by mail before the IRS deadline in 2026.

Is itemizing or taking the standard deduction better?

Deciding whether to itemize or take the standard deduction is all about figuring out which saves you more money. Put more simply, which deduction is larger?

For 2025, the standard deduction is $15,000. That means that, if your taxable income is $40,000, you can take the standard deduction and report only $25,000 in taxable income to the IRS.

If your itemized deductions for the year total $10,000, itemizing would mean reporting $30,000 in taxable income, which would result in you paying more tax overall, so the standard deduction makes more sense. If your itemized deductions from mortgage interest, student loan interest, and charitable donations totaled $17,000, you’d be able to report $23,000 in taxable income by itemizing, saving you money.

Keep in mind that if you hire someone to prepare your taxes, it may cost more to hire them if you want to itemize because of the extra paperwork. If the difference between itemizing and the standard deduction is small, you might save money by taking the standard deduction to avoid additional tax prep fees.

FAQ about mortgage deductions

The mortgage interest deduction can help make homeownership more affordable, so it’s important to understand how it works.

Are there limits on the mortgage interest deduction?

Yes. For loans issued before December 15, 2017, you can deduct interest charged on balances up to $1 million ($500,000 if married, filing separately). Loans after that date have a limit of $750,000 ($375,000 if married, filing separately).

Why is some mortgage interest not tax deductible?

For mortgage interest to be tax deductible, the loan must be secured by the home it was used to purchase. To deduct interest on second loans, you must use the funds to buy, build, or substantially improve the property.

What other tax deductions are there for homeowners?

The mortgage interest deduction is just one of many deductions available to homeowners. For example, you can often deduct some amount of your capital gains when selling the home. You can also deduct state and local taxes (SALT), such as property tax or income tax, up to $40,000 for tax years 2025 through 2029, which is a huge benefit in high-tax states.

Can you deduct mortgage interest after refinancing your home?

Yes, you can deduct mortgage interest after refinancing the mortgage on your first or second home, so long as the loan was used to “buy, build, or substantially improve” the property.

The bottom line: Learn all about mortgage interest deductions

The mortgage interest deduction lets homeowners deduct the amount they pay in interest and other related costs from their income when filing their taxes. This can help to make homeownership more affordable.

Every tax situation is different, and filling out tax forms can be complicated, so consider consulting a tax professional for help determining whether itemizing and taking the mortgage interest deduction is right for you.

If you’re looking to buy a home or refinance your existing mortgage, you can start the approval process with Rocket Mortgage.

This article is for informational purposes only and is not intended to provide financial, investment, or tax advice. You should consult a qualified financial or tax professional before making decisions regarding your retirement funds or mortgage.

Rocket Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency.

Home Equity Loan product requires full documentation of income and assets, credit score and max loan-to-value (LTV), combined loan-to-value (CLTV), and home equity combined loan-to-value (HCLTV) ratios. Requirements were updated 11/19/25 and are tiered as follows: 680 minimum FICO with a max LTV/CLTV/HCLTV of 80%, 700 minimum FICO with a max LTV/CLTV/HCLTV of 85%, and 740 minimum FICO with a max LTV/CLTV/HCLTV of 90%. Your debt-to-income ratio (DTI) must be 50% or below. Valid for loan amounts between $45,000.00 and $500,000.00 (minimum loan amount for properties located in Michigan is $10,000.00). Product is a second standalone lien and may not be used for piggyback transactions. Product not available on Ameriprise products. Guidelines may vary for self-employed individuals. Some mortgages may be considered “higher priced” based on the APOR spread test. Higher priced loans are not allowed on properties located in New York. Additional restrictions apply. This is not a commitment to lend.

Refinancing may increase finance charges over the life of the loan.