Definition
The mortgage interest deduction lets homeowners who itemize deduct interest paid on qualifying home loans, within limits.
How It Works
Interest on acquisition debt up to a cap on a primary and one additional residence is deductible for those who itemize. The cap on the loan amount eligible for the deduction was reduced by the 2017 tax law for newer loans.
Example
A homeowner with a large mortgage deducts the interest on debt up to the cap as part of their itemized deductions.
When It Works Best
It is most valuable to those whose total itemized deductions exceed the standard deduction.
Who It Applies To
Homeowners with mortgage debt who itemize.
Watch-Outs
The loan-amount cap limits the deduction on large mortgages, and interest on home equity debt is only deductible if used to buy, build, or improve the home.
