⚡ Quick Answer: What Are the Mortgage Tax Deduction Limits in 2026?
In 2026, you can deduct mortgage interest on up to $750,000 of acquisition debt ($375,000 if married filing separately) for homes purchased after December 15, 2017. Homes purchased BEFORE that date are grandfathered at $1 million limit. The SALT (State and Local Tax) cap increases to $40,000 for married couples in 2026-2029 thanks to the new OBBBA tax law. You must itemize deductions to benefit (standard deduction 2026: ~$31,000 married).
💰 Real Example (2026):
Scenario: Married couple, $600K mortgage at 6.5%, $15K property taxes, $5K state income tax
- • Mortgage interest: $39,000/year (deductible)
- • SALT (property + state taxes): $20,000 → capped at $40,000 in 2026 (fully deductible!)
- • Total itemized: $59,000 vs standard $31,000 → Save $8,400 in taxes (24% bracket)
2026 Big Change: SALT cap increases from $10K to $40K (married) = HUGE tax savings for homeowners! Get pre-approved and maximize your tax benefits!
📊 2026 Mortgage Interest Deduction Limits (Complete Breakdown)
The mortgage interest deduction limits depend on WHEN you bought your home. Here's the complete breakdown for 2026:
🏠 2026 Deduction Limits by Purchase Date:
Homes Purchased AFTER December 15, 2017:
This is the TOTAL acquisition debt limit across all homes. If you have multiple mortgages, the combined total cannot exceed $750K for deduction purposes.
Homes Purchased BEFORE December 15, 2017 (Grandfathered):
If you bought before Dec 15, 2017, you're grandfathered at the higher $1M limit. This applies even if you refinance, as long as you don't increase the principal balance.
⚠️ Critical: These limits apply to "acquisition indebtedness" (debt used to buy, build, or substantially improve your home). Home equity loans are only deductible if used for home improvements, NOT for debt consolidation or other purposes.
Example: If you have a $900K mortgage on a home bought in 2020, you can only deduct interest on the first $750K. The interest on the remaining $150K is NOT deductible. Compare lenders and understand your tax benefits!
🎉 HUGE 2026 Change: SALT Cap Increases to $40,000!
The biggest tax news for homeowners in 2026: the SALT (State and Local Tax) deduction cap increases from $10,000 to $40,000 for married couples ($20,000 single) for tax years 2026-2029. This is thanks to the "One Big Beautiful Bill Act" (OBBBA) signed in 2025.
💎 SALT Deduction Explained:
SALT = State and Local Taxes. This includes:
- • Property taxes on your home
- • State income taxes OR state sales taxes (choose one)
2025 vs 2026 Comparison:
2025 (Old Law):
Property taxes: $15,000
State income tax: $8,000
Total SALT: $23,000
Deduction: $10,000 (capped)
Lost benefit: $13,000
2026 (New Law):
Property taxes: $15,000
State income tax: $8,000
Total SALT: $23,000
Deduction: $23,000 (under $40K cap)
Extra savings: $3,120 (24% bracket)
🎯 Who Benefits Most:
- • High-tax states: CA, NY, NJ, CT, IL (property taxes $10K-$30K)
- • High earners: State income tax $10K-$50K
- • Expensive homes: Property taxes $15K-$40K
- • Married couples: $40K cap vs $20K single
Estimated savings: $3,000-$7,000/year for typical homeowners in high-tax states!
2026 Strategy: If you're in a high-tax state, the increased SALT cap makes homeownership MUCH more tax-advantageous. This is a HUGE win for homeowners! Get pre-approved and calculate your 2026 tax savings!
📋 Must Itemize to Deduct: Standard Deduction vs Itemized
To claim the mortgage interest deduction, you MUST itemize deductions on Schedule A. If your total itemized deductions don't exceed the standard deduction, you're better off taking the standard deduction (no mortgage benefit).
2026 Standard Deduction Amounts:
Note: These are estimated 2026 amounts adjusted for inflation. Final IRS numbers released in late 2025.
🧮 Should You Itemize? (Decision Framework)
Calculate Your Total Itemized Deductions:
Decision:
✅ If Total Itemized > $31,000 (married) → ITEMIZE
❌ If Total Itemized < $31,000 (married) → Take Standard Deduction
Reality Check: With the increased SALT cap ($40K), MORE homeowners will benefit from itemizing in 2026 vs 2025. If you're on the borderline, consider bunching charitable donations or prepaying property taxes to maximize deductions. Compare lenders and plan your 2026 taxes strategically!
❓ Mortgage Tax Deduction FAQ (2026)
Can I deduct mortgage interest on a second home?
YES. The $750K limit applies to your COMBINED acquisition debt on primary + second home. Example: $600K primary + $150K vacation home = $750K total, fully deductible. If combined > $750K, only interest on first $750K is deductible.
What about home equity loans/HELOCs?
Interest is deductible ONLY if you use the funds to "buy, build, or substantially improve" your home. If you use HELOC for debt consolidation, tuition, or other purposes, the interest is NOT deductible. The loan must also fit within the $750K total limit.
Is PMI (Private Mortgage Insurance) deductible in 2026?
YES! Starting in 2026, PMI premiums are deductible again thanks to OBBBA. However, there's an income cap: the deduction phases out between $100K-$110K AGI ($50K-$55K married filing separately). If your AGI exceeds $110K, no PMI deduction.
What if I refinance my mortgage?
If you refinance, you keep your grandfathered status (if applicable) as long as you don't INCREASE the principal balance. Example: $900K mortgage (pre-2017) refinanced to $850K = still $1M limit. But if you cash-out refi to $950K, the extra $50K falls under new $750K rules. Get pre-approved for refinancing and understand tax implications!
How much can I actually save with the mortgage interest deduction?
Depends on your tax bracket. Example: $30K mortgage interest deduction in 24% bracket = $7,200 tax savings. In 32% bracket = $9,600 savings. Higher income = bigger benefit. Combined with increased SALT cap, total savings can reach $10K-$15K/year for high earners in expensive homes.
💸 Ready to Maximize Your 2026 Tax Savings?
With the new $40K SALT cap and mortgage interest deduction, you could save $8K-$15K/year in taxes! Get pre-approved and start planning your 2026 tax strategy today!