Mortgage Interest Deduction: Who Still Benefits
Federal rules for 2026: the $750,000 debt limit, when itemizing beats the $32,200 standard deduction, co-op interest, HELOCs, PMI and New York State rules.
7 min read · Updated
You can deduct interest on up to $750,000 of mortgage debt used to buy, build or improve your main home and one second home, but only if you itemize. For 2026 that means your mortgage interest, capped state and local taxes and other itemized deductions together must top the $32,200 standard deduction for married couples ($16,100 for single filers) before you save anything.
With a standard deduction that large, many owners with modest loans get no benefit. Owners with large NYC mortgages often still do. Here is how to tell which group you are in.
At a glance
- Debt limit (loans after Dec 15, 2017)
- $750,000
- $375,000 married filing separately; now permanent
- Older loans
- $1,000,000
- Taken out Oct 14, 1987 – Dec 15, 2017
- 2026 standard deduction
- $32,200 joint
- $16,100 single, $24,150 head of household
- Mortgage insurance (PMI)
- Deductible again from 2026
- Phases out above $100,000 AGI
The federal rules in 2026
How much debt qualifies
IRS Publication 936 sorts home acquisition debt by when you took it out:
| When the debt was taken out | Limit (joint / single) | Married filing separately |
|---|---|---|
| On or before Oct 13, 1987 (grandfathered) | No dollar cap | No dollar cap |
| Oct 14, 1987 – Dec 15, 2017 | $1,000,000 | $500,000 |
| After Dec 15, 2017 | $750,000 | $375,000 |
The $750,000 limit was originally due to expire after 2025. The 2025 federal tax law (Public Law 119-21) removed that end date, so it now applies going forward. The limit covers the total of your loans on a main home and one second home together. Grandfathered and older debt counts against the $750,000 first.
Home equity loans and HELOCs
Interest on a home equity loan or HELOC is deductible only if you used the money to buy, build or substantially improve the home that secures it, and only within the same debt limit. The IRS is direct: no matter when the debt was taken out, interest on home equity debt used for other purposes, such as paying off cards or buying a car, is no longer deductible. Keep receipts that show renovation spending. See HELOCs explained.
Mortgage insurance premiums are back
The deduction for mortgage insurance premiums (private mortgage insurance, and FHA, VA and USDA insurance) expired after 2021. Public Law 119-21 brought it back for tax years beginning after December 31, 2025, by treating the premiums as mortgage interest. The deduction shrinks by 10% for each $1,000 of adjusted gross income above $100,000 ($500 above $50,000 if married filing separately), counting any part of $1,000 as a full step, so it is gone once AGI tops $109,000. Check the 2026 IRS forms for reporting details when they are released.
Co-op owners
A co-op apartment qualifies. Publication 936 says a qualified home includes stock in a cooperative housing corporation that entitles you to live in the unit. Co-op owners can deduct two kinds of interest:
- Your share loan. Interest on the loan you took to buy your shares is treated as home mortgage interest.
- Your share of the building's mortgage interest, which you pay through maintenance. The co-op tells you the amount each year, figured by your share count. Publication 530 says you must reduce it by your share of any cash patronage dividend (a refund of interest the co-op paid in an earlier year).
Your share of the building's real estate taxes is a separate deduction that falls under the SALT cap (see the SALT cap explained). Estimate both with the co-op maintenance tax deduction calculator.
Worked examples: when it helps and when it doesn't
These use an illustrative 6.5% 30-year fixed rate and first-year interest. State and local tax (SALT) amounts are assumptions. Savings = (itemized deductions − standard deduction) × marginal rate.
| A: Joint, $250k loan | B: Single, $500k loan | C: Joint, $900k loan | |
|---|---|---|---|
| First-year interest | $16,168 | $32,335 | $58,204 |
| Deductible interest | $16,168 | $32,335 | ≈ $48,500 (750/900 of it) |
| SALT deducted (assumed) | $14,000 | $15,000 | $30,000 |
| Itemized total | $30,168 | $47,335 | ≈ $78,500 |
| Standard deduction | $32,200 | $16,100 | $32,200 |
| Extra deduction from itemizing | $0 (take the standard) | $31,235 | ≈ $46,300 |
| Marginal rate (assumed income) | — | 24% ($200k) | 24% ($400k) |
| Federal tax saved | $0 | ≈ $7,500 | ≈ $11,100 |
- Household A pays $16,168 of interest but saves nothing: its itemized total is below the joint standard deduction. This is the common case for smaller loans and joint filers.
- Household B benefits a lot because a single filer's standard deduction is half as large.
- Household C can deduct interest on only $750,000 of its $900,000 loan. Publication 936 has a worksheet that uses average balances; the simple 750/900 ratio here is an approximation.
New York State is different
New York did not adopt the 2018 federal changes for itemized deductions. Per the state's Form IT-196 instructions:
| Federal (2026) | New York State | |
|---|---|---|
| Acquisition debt limit (newer loans) | $750,000 | $1,000,000 |
| Home equity debt used for other purposes | Up to $100,000 of debt | |
| Can itemize even if you take the federal standard deduction | ||
| Standard deduction, married filing jointly | $32,200 | $16,050 |
| State and local income taxes deductible | Yes, within SALT cap | No |
Because the NY standard deduction is much smaller ($16,050 joint, $8,000 single), many NYC owners who don't itemize federally still itemize on their state return. New York also reduces itemized deductions for higher-income filers. For full-year NYC residents, city income tax is generally figured on the same taxable income as the state return, so the state choice carries through to the city tax.
Quick checklist
- Find last year's Form 1098 (and, for a co-op, the building's letter showing your share of interest and taxes).
- Add your other itemized deductions: SALT up to the cap, charitable gifts, and so on.
- Compare with the standard deduction for your filing status. If it's lower, itemizing saves you money.
- Check whether your loans exceed $750,000 or include home equity money spent on things other than the home.
- Figure your New York return separately. You may itemize there even if you don't federally.
This is general information. A tax professional can confirm how the rules apply to your return.
Re-verified 2026-10-12. Debt limits ($750k/$375k after Dec 15 2017; $1M/$500k Oct 13 1987–Dec 15 2017; pre-Oct 13 1987 grandfathered), home equity rule, co-op tenant-stockholder share of interest and patronage dividend reduction: Pub 936 (2025) and Pub 530. Permanence of $750k limit and home-equity disallowance, and reinstatement of mortgage insurance premiums as qualified residence interest for tax years beginning after 2025 with the $100k AGI phaseout: 26 USC 163(h)(3)(E) and (F) as amended by Pub. L. 119-21 §70108 (effective for tax years beginning after Dec 31 2025), read on Cornell LII (amendment note: PL 119-21 §70108(b), effective for taxable years beginning after Dec 31 2025). Pub 936 (2025) still says the MIP deduction expired for 2025, consistent with reinstatement from 2026. Fixed: MIP phase-out end point stated precisely ($109,000). 2026 standard deduction ($32,200 MFJ, $16,100 single, $24,150 HoH) and 2026 brackets (24% from $105,700 single / $211,400 MFJ): IRS IR-2025-103. NY: itemized deductions use pre-2018 federal rules ($1M acquisition debt, home equity debt up to $100k), may itemize for NY regardless of federal choice, state and local income taxes subtracted, NY standard deduction $16,050 MFJ / $8,000 single (IT-196-I and IT-201-I, 2025). Worked examples recomputed: first-year interest $16,168 / $32,335 / $58,204 at an illustrative 6.5% 30-year rate; 750/900 = $48,503; savings $0 / $7,496 / $11,113; all three households stay in the 24% bracket. SALT amounts are assumptions; the $900k proration is a simplified version of the Pub 936 average-balance worksheet.
Sources
- Publication 936 (2025), Home Mortgage Interest Deduction · Internal Revenue Service (accessed October 12, 2026)
- Publication 530 (2025), Tax Information for Homeowners · Internal Revenue Service (accessed October 12, 2026)
- IRS releases tax inflation adjustments for tax year 2026 · Internal Revenue Service (accessed October 12, 2026)
- 26 U.S. Code § 163 (interest), including (h)(3) and 2025 amendments · Legal Information Institute, Cornell Law School (accessed October 12, 2026)
- Instructions for Form IT-196 (2025), New York itemized deductions · NYS Department of Taxation and Finance (accessed October 12, 2026)
- Itemized deductions · NYS Department of Taxation and Finance (accessed October 12, 2026)
- Instructions for Form IT-201 (2025), standard deduction table · NYS Department of Taxation and Finance (accessed October 12, 2026)
General information, not legal, tax or financial advice. Rules change; confirm with the agency or a professional before you act.