Mortgage Interest Deduction 2026: Limits, PMI & Rules

This article is for educational purposes only and is not tax, legal, or financial advice. Tax rules change, so always check current IRS guidance or consult a qualified tax professional.

If you own a home, the mortgage interest deduction is probably the tax break you have heard about most. For 2026 it comes with two wins and one big catch.

The wins: the $750,000 loan cap is now permanent, and mortgage insurance premiums (PMI) are deductible again. The catch is that the deduction only does anything if you itemize, and most homeowners don’t. This guide walks through the limits, the rules, and the one calculation that decides whether any of it matters for you.

What is the mortgage interest deduction (and what changed for 2026)?

The mortgage interest deduction lets you subtract the interest you pay on a qualified home loan from your taxable income. It is not a credit. It reduces the income the IRS taxes, not your tax bill dollar for dollar.

The part that trips people up is that it is an itemized deduction. You claim it on Schedule A, and you can only use Schedule A if you skip the standard deduction. More on that decision below, because it is the whole ballgame for most filers.

Two changes came out of the One Big Beautiful Bill Act (OBBBA, P.L. 119-21), signed in 2025. Both are about permanence.

First, the $750,000 acquisition-debt cap was scheduled to revert to $1,000,000 after 2025. OBBBA locked it in at $750,000 for good. Second, the deduction for mortgage insurance premiums had lapsed since the 2021 tax year. OBBBA brought it back starting January 1, 2026, and made it permanent.

2026 deduction limits: the $750,000 cap and the $1M grandfather

For loans taken out after December 15, 2017, you can deduct interest on up to $750,000 of acquisition debt ($375,000 if you file married filing separately). Acquisition debt is money you borrowed to buy, build, or substantially improve the home.

Older loans get better treatment. If you took out your mortgage before December 16, 2017, you keep a grandfathered limit of $1,000,000 ($500,000 if married filing separately). Refinancing a grandfathered loan generally keeps the higher limit, as long as you don’t increase the balance.

One detail often gets skipped: the cap applies to your combined qualified home debt, not to each loan separately. If you have a main home and a second home, you add the balances together and the single limit covers both. Two $500,000 mortgages don’t each get their own $750,000 ceiling.

If your total balance sits above the limit, you don’t lose the whole deduction. You deduct the portion of interest that maps to debt up to the cap, and IRS Publication 936 has a worksheet for the math.

PMI is deductible again in 2026

If you put down less than 20%, your lender probably charges private mortgage insurance. Starting with the 2026 tax year, those premiums are deductible again, and OBBBA (Section 70108) made that permanent rather than another year-by-year extension.

You report mortgage insurance premiums on Schedule A, line 8a, alongside your home mortgage interest. Your lender includes the annual total on Form 1098.

There is an income phase-out that many guides leave out. The PMI deduction starts shrinking once your adjusted gross income (AGI) climbs above $100,000 ($50,000 if married filing separately). It drops by 10% for each $1,000 you go over, so it phases out completely at $110,000 ($55,000 if married filing separately).

So the PMI write-off mostly helps lower and middle-income homeowners. If your AGI lands between $100,000 and $110,000, you get a partial deduction. At or above that ceiling, the premiums are not deductible at all.

What counts: acquisition debt, points, second homes, and HELOC rules

Not every dollar of interest on every home loan qualifies. Here is what does.

Acquisition debt

Qualified interest comes from debt used to buy, build, or substantially improve a home that secures the loan. That is the core test. A loan you took to put on an addition or remodel the kitchen counts. A loan you took to pay for a vacation does not, even if your house is the collateral.

Mortgage points

Points are prepaid interest, and they are deductible. Usually you spread the deduction over the life of the loan. But you can deduct them all at once in the year you paid them if you meet every requirement in Publication 936, which commonly applies to points paid to buy your main home. Points paid on a refinance generally have to be deducted gradually.

Second homes

A qualified home is your main home plus one second home. The second home can be a house, condo, co-op, or even a boat or RV, as long as it has sleeping, cooking, and toilet facilities. Remember the combined debt limit still applies across both.

HELOC and home equity loans

This is where the confusion lives. Home equity loan and HELOC interest is deductible only when you use the money to buy, build, or substantially improve the home that secures the loan. Use a HELOC to renovate that same house, and the interest qualifies. Use it to consolidate credit card debt or buy a car, and it does not. The TCJA created this use-based rule, and OBBBA made it permanent.

Should you itemize? Standard deduction vs. the mortgage interest deduction in 2026

Now the decision that actually determines whether any of this saves you money.

The mortgage interest deduction only helps if your total itemized deductions beat the standard deduction. For 2026 the standard deduction is $16,100 for single filers and $32,200 for married filing jointly. If your itemized total comes in below that, you take the standard deduction and your mortgage interest changes nothing on your return.

This is why roughly only 1 in 5 homeowners actually claims the deduction. A mortgage alone often isn’t enough to clear the bar, especially a few years in when more of each payment goes to principal instead of interest.

What pushes people over the threshold is stacking. The SALT deduction (state and local income and property taxes) now has a much higher $40,400 cap under OBBBA, up from $10,000. Add your mortgage interest, your state and property taxes, and any charitable giving, and the total has a real shot at beating the standard deduction, particularly in high-tax states.

A quick example. Say a married couple paid $14,000 in mortgage interest, $12,000 in state and property taxes, and gave $3,000 to charity. Their itemized total is $29,000, still below the $32,200 standard deduction. They take the standard deduction, and the mortgage interest gives them nothing extra. Bump the mortgage interest to $20,000 and the total jumps to $35,000, which now beats $32,200 by $2,800. Itemizing wins, and the difference is what gets taxed.

The lesson: run the numbers both ways before you assume the deduction helps. You can model standard versus itemized side by side and watch the result update as you enter figures in Tax47, which is built to answer exactly this “does this help me?” question. You can also start with the 2026 standard deduction numbers to know the line you need to clear.

How to claim it (and estimate your refund first)

If itemizing wins, here is the mechanical part.

Your lender mails Form 1098 each January. It lists the mortgage interest you paid, any deductible points, and your mortgage insurance premiums for the year.

Transfer those figures to Schedule A (Form 1040). Home mortgage interest and points go on the mortgage interest lines, and PMI goes on line 8a. Add Schedule A to your return in place of the standard deduction.

Before you commit, estimate the outcome. Plug your W-2, 1099, and Schedule C figures into Tax47 and toggle between the standard deduction and your itemized total to see which produces the smaller tax bill, with the 2026 OBBBA changes already applied. Browse the other tax tools and calculators if you want to size up the rest of your return too.

Frequently Asked Questions

What is the mortgage interest deduction limit for 2026?

You can deduct interest on up to $750,000 of acquisition debt ($375,000 if married filing separately). Loans taken before December 16, 2017 keep a grandfathered $1,000,000 limit ($500,000 if married filing separately). The limit applies to the combined balance of your main home and one second home, not per loan.

Is PMI (mortgage insurance) tax deductible in 2026?

Yes. Mortgage insurance premiums are deductible again starting January 1, 2026, and the One Big Beautiful Bill Act made the deduction permanent. It phases out as adjusted gross income rises above $100,000 ($50,000 if married filing separately) and disappears entirely at $110,000 ($55,000 if married filing separately).

Can I deduct mortgage interest if I take the standard deduction?

No. The mortgage interest deduction is an itemized deduction claimed on Schedule A. If you take the standard deduction, you cannot also deduct your mortgage interest, so the deduction only helps when your total itemized deductions beat the standard deduction for your filing status.

Is home equity loan or HELOC interest deductible in 2026?

Only when the borrowed money is used to buy, build, or substantially improve the home that secures the loan. If you use a HELOC to pay off credit cards, buy a car, or cover other personal expenses, that interest is not deductible. This use-based test from the TCJA is now permanent.

Does the mortgage interest deduction apply to a second home?

Yes. You can deduct qualified interest on your main home plus one second home, as long as the combined debt stays within the limit ($750,000, or $1,000,000 for grandfathered loans). A second home can be a house, condo, or even a boat or RV if it has sleeping, cooking, and toilet facilities.

Can I deduct mortgage points in 2026?

Yes. Points are prepaid interest. You generally deduct them over the life of the loan, but you can deduct them all at once in the year you paid them if you meet every requirement in IRS Publication 936, which usually applies to points paid to buy your main home.

How do I know if itemizing beats the standard deduction in 2026?

Add up your itemized deductions (mortgage interest, state and local taxes up to the SALT cap, charitable gifts, and qualifying medical costs) and compare the total to the 2026 standard deduction: $16,100 for single filers and $32,200 for married filing jointly. Itemize only if your total is higher. You can estimate both ways live in Tax47.

Where do I report mortgage interest and PMI on my return?

Both go on Schedule A (Form 1040). Home mortgage interest and points reported on Form 1098 go on the mortgage interest lines, and mortgage insurance premiums are reported on Schedule A line 8a. Your lender sends you Form 1098 each January with the totals.

Sources & References

IRS Publication 936, Home Mortgage Interest Deduction — Acquisition debt, the $750,000/$1,000,000 limits, points, second homes, and HELOC rules.
IRS, New and enhanced deductions for individuals — OBBBA changes, including the restored mortgage insurance premium deduction.
IRS Instructions for Schedule A (Form 1040) — Where to report mortgage interest, points, and PMI (line 8a).
IRS Topic No. 504, Home mortgage points — Rules for deducting points all at once versus over the life of the loan.
Congress.gov / CRS, Reforms to the Mortgage Interest Deduction (IF13190) — Background on the deduction limits and legislative history.