Mortgage Interest Deduction (MID): What It Is, Who Qualifies, How the Tax Cuts & Jobs Act Changed It, and How to Claim It on Your 2025 Taxes

One of the biggest financial perks of homeownership is the Mortgage Interest Deduction (MID). It can reduce your taxable income and save you money at tax time—but it’s also one of the most misunderstood tax benefits. With the changes made by the Tax Cuts & Jobs Act (TCJA)—often referred to as the “big, beautiful bill”—many homeowners still aren’t sure what’s deductible and what isn’t.

Let’s break it down in simple terms so you can make the most of this benefit when filing your 2025 taxes.

What Is the Mortgage Interest Deduction?

The Mortgage Interest Deduction allows homeowners to deduct the interest paid on a qualified home loan from their taxable income. This includes loans used to:

Buy a home
Build a home
Improve a home

The deduction applies to your primary residence and one second home (like a vacation property).

MID reduces your taxable income, which can lower your tax bill or increase your refund.

Who Can Claim the Mortgage Interest Deduction?

To claim the deduction, you must meet these criteria:

✔ 1. You must itemize your deductions

MID is available only if you itemize on Schedule A.
If your total itemized deductions don’t exceed the standard deduction, it may not be worth itemizing.

✔ 2. You must have a qualified home loan

A “qualified residence loan” must:

Be secured by your home (a recorded mortgage or deed of trust)
Be used to buy, build, or substantially improve the home

HELOC interest is deductible too—but only if the borrowed funds were used for home improvements.

✔ 3. The loan must meet federal loan limit rules

This is where the “big beautiful bill” changed things.

How the Tax Cuts & Jobs Act (TCJA) Changed the Mortgage Interest Deduction

The TCJA (2017), which took effect in 2018 and continues to apply in 2025, made three major changes:

🔹 1. Reduced the mortgage limit from $1,000,000 to $750,000

For loans taken out after December 15, 2017, you can deduct interest on up to $750,000 of mortgage debt if filing jointly (or $375,000 if single/married filing separately).

Loans originated before December 15, 2017 are grandfathered under the old $1,000,000 limit.

🔹 2. Eliminated the deduction for home equity loans unless used for home improvement

Before TCJA, interest on a HELOC was deductible no matter what you used the money for.
After the bill, it’s deductible only when used for renovations or improvements that add value to the home.

🔹 3. Nearly doubled the standard deduction

This alone caused fewer people to itemize, meaning fewer homeowners benefit from MID today.

2025 Standard Deduction Estimates (subject to final IRS updates):

$30,250 Married Filing Jointly
$15,125 Single
$15,125 Married Filing Separately
$22,950 Head of Household

If your mortgage interest + property taxes + charitable contributions + other deductions exceed those numbers, you’ll likely benefit from itemizing.

What Counts as Deductible Mortgage Interest?

You can generally deduct:

Interest paid on primary residence mortgage
Interest paid on second home mortgage
Interest on refinanced loans (up to the original principal)
Mortgage insurance premiums (PMI/MIP) (currently extended through 2025 depending on legislative updates—verify each tax year)
Points paid on a purchase or refinance
HELOC/second mortgage interest used for home improvements

You cannot deduct:

HOA dues
Home insurance
Extra principal payments
Interest on unsecured loans (e.g., personal loans used for home repairs)

How to Claim the Mortgage Interest Deduction on Your 2025 Taxes

Here’s what the process looks like when filing your 2025 return (due in 2026):

1. Gather your forms

You’ll receive a Form 1098 from your lender by January 31, 2026.
This form lists:

Total mortgage interest paid
Mortgage insurance premiums
Points paid
Remaining principal balance

If you have more than one property or lender, you’ll receive multiple 1098s.

2. Add up your itemized deductions

On Schedule A (Form 1040), you’ll include:

Mortgage interest
Property taxes (deductible up to the $10,000 SALT cap)
Charitable contributions
Medical expenses (if qualifying)
Casualty/theft loss (rare)

If your total itemized deductions exceed the standard deduction, you’ll proceed with itemizing.

3. Enter your mortgage interest on Schedule A

It goes on Line 8a–8d, depending on the type:

8a: Home mortgage interest reported on Form 1098
8b: Home mortgage interest not reported on Form 1098
8c: Points
8d: Mortgage insurance premiums

This total flows into your itemized deduction amount on the main Form 1040.

Tips to Maximize Your Mortgage Interest Deduction

✔ Consider bunching deductions

If your itemized deductions fall just short of the standard deduction, you can “bunch” charitable contributions or medical expenses into one year.

✔ Track HELOC usage

Keep receipts showing that borrowed funds were used for home improvements to ensure HELOC interest qualifies.

✔ Revisit each year

Your tax situation changes with interest rates, refinancing, and life events—so re-evaluate annually whether itemizing benefits you.

Bottom Line

The Mortgage Interest Deduction is still a valuable tax benefit for many homeowners, even after the Tax Cuts & Jobs Act reduced the loan limits and changed HELOC rules. If you plan to itemize, you can deduct interest on up to $750,000 of qualified mortgage debt—and that can significantly reduce your tax bill.

If you’re a homeowner or planning to become one in 2025, understanding MID helps you save money and make smarter long-term financial decisions.