Before 2017, two-thirds of homeowners itemized and deducted mortgage interest. After the Tax Cuts and Jobs Act raised the standard deduction, fewer than 10% of homeowners itemize. The mortgage interest deduction is only valuable if your itemized total exceeds the standard deduction — which for 2026 is $14,600 single / $29,200 married filing jointly.
Worked example: Married couple, $420,000 loan at 7.0%, paying $29,000 in interest in year one. State/local taxes at the $10,000 SALT cap. Charitable gifts $4,000. Total itemized: $43,000. Standard deduction: $29,200. Itemizing nets them $13,800 in additional deductions × 24% bracket = $3,312 in real tax savings.
The threshold math that most calculators skip
The mortgage interest deduction is worthless to most homeowners because their total itemized deductions do not exceed the standard deduction. Compute it both ways: standard vs itemized (mortgage interest + SALT capped at $10K + charitable). Keep the higher number. Your real savings from the mortgage deduction = (itemized total − standard deduction) × your marginal tax rate, capped at the actual mortgage interest paid.
Who benefits most
- Married couples with mortgages above $500K and full $10K SALT
- High-income earners in high-tax states (CA, NY, NJ)
- Homeowners with significant charitable giving
- First 3-5 years of a large mortgage (interest is highest)
Deduction limits
- Loans up to $750,000 (married filing jointly) are fully deductible. Grandfathered pre-12/15/2017 loans up to $1M.
- Home equity loan and HELOC interest deductible ONLY if proceeds used for home acquisition or improvement.
- Investment property mortgage interest is deductible as a business expense against rental income on Schedule E — different rules, often more valuable.