You don't get a refund for mortgage interest—but you may pay less tax

Mortgage interest doesn't trigger a refund. Instead, it reduces the amount of income the IRS taxes you on. If you itemize deductions on your tax return, you can deduct the interest you paid on your mortgage during the year. That deduction lowers your taxable income, which can lower the tax you owe. If the tax you owe drops below what you've already paid through withholding or estimated payments, then you get a refund—but the refund comes from overpaying your taxes overall, not from the mortgage interest itself.

The key requirement: you must itemize deductions instead of taking the standard deduction. Most people don't itemize anymore, which means most homeowners don't benefit from deducting mortgage interest at all.

Key Takeaways

  • Mortgage interest reduces your taxable income only if you itemize deductions, which requires your total deductions to exceed the standard deduction for your filing status.
  • The standard deduction for 2024 is $14,600 for single filers and $29,200 for married couples filing jointly, and these amounts reset each year.
  • You can only deduct interest on mortgages up to $750,000 of the loan principal, a limit that has been in place since 2018.
  • If you do itemize and deduct mortgage interest, any resulting tax savings appear as a lower tax bill or a larger refund, not as a separate mortgage interest refund.

When itemizing makes sense for mortgage interest

Itemizing is worth doing only if your combined deductions—mortgage interest, property taxes, charitable donations, and state and local taxes—add up to more than the standard deduction. For 2024, the standard deduction is $14,600 for single filers, $29,200 for married couples filing jointly, and $21,900 for heads of household. These amounts change yearly.

If you're in your first few years of a mortgage, most of your payment goes toward interest rather than principal, which means your deductible interest is highest early on. As the years pass, the balance shifts and less of each payment is interest. This is why some homeowners itemize in early mortgage years but switch to the standard deduction later.

To know whether itemizing helps you, add up: mortgage interest paid (from your 1098-INT form), property taxes paid, state and local taxes (capped at $10,000), and any other deductible expenses like charitable donations. If that total exceeds the standard deduction for your filing status, itemizing saves you money.

The $750,000 mortgage interest limit

You can only deduct interest on the first $750,000 of mortgage principal. This limit applies to mortgages taken out after December 15, 2017. If your mortgage is larger than $750,000, you deduct interest only on the portion up to that threshold.

For example, if you have a $1 million mortgage and paid $40,000 in interest last year, you can deduct interest only on the $750,000 portion. The interest on the remaining $250,000 is not deductible. Your lender will report the total interest paid on your 1098-INT form, so you'll need to calculate the deductible portion yourself or work with a tax preparer.

How mortgage interest appears on your tax forms

Your mortgage lender sends you a Form 1098-INT by January 31 each year, showing the interest you paid during that tax year. This form also shows property taxes paid if your lender collected them through escrow. You use this form to calculate your itemized deductions.

The 1098-INT shows the total interest paid, not the deductible portion. If your mortgage exceeds $750,000, you must subtract the non-deductible interest yourself before entering the amount on Schedule A (the itemized deductions form). If you use tax software or a preparer, they can help you make this calculation.

The difference between a deduction and a refund

A deduction reduces your taxable income. A refund is money the government sends you because you overpaid your taxes. These are not the same thing. If mortgage interest lowers your taxable income enough that your total tax bill drops below what you've already paid through payroll withholding or estimated tax payments, you'll receive a refund—but that refund is the result of overpaying your taxes overall, not a direct payment for mortgage interest.

For example: suppose your taxable income before the mortgage interest deduction is $80,000, and you've had $12,000 withheld from paychecks. If the mortgage interest deduction lowers your taxable income to $70,000, your tax bill might drop from $9,200 to $8,500. You've already paid $12,000, so you get a $3,500 refund. But that refund isn't "from" the mortgage interest—it's from the fact that you overpaid your taxes for the year.

When you can't deduct mortgage interest

You cannot deduct mortgage interest if you take the standard deduction instead of itemizing. About 90% of taxpayers take the standard deduction, which means they don't benefit from mortgage interest deductions at all.

You also cannot deduct interest on a home equity line of credit (HELOC) or second mortgage unless the borrowed money was used to buy, build, or substantially improve your home. Interest on a HELOC used for other purposes—paying off credit cards, funding a vacation, or any other use—is not deductible.

If you're married and file separately, the rules are stricter. You can deduct mortgage interest only if you itemize, and the $750,000 limit is split between you and your spouse ($375,000 each).

Frequently Asked Questions

Will I get a bigger refund if I have a mortgage?

Not necessarily. You get a bigger refund only if you itemize deductions and your total deductions exceed the standard deduction. Most homeowners don't itemize, so they see no tax benefit from mortgage interest. Even if you do itemize, the refund you receive is based on your total tax situation, not the mortgage interest alone.

Can I deduct mortgage interest if I take the standard deduction?

No. You can deduct mortgage interest only if you itemize deductions on Schedule A. If you take the standard deduction, you cannot deduct mortgage interest, even though you paid it. This is why some homeowners choose to itemize in years when their deductions are high.

What if my mortgage is paid off—can I still deduct interest?

You can deduct interest only in the year you paid it. Once your mortgage is paid off, you have no mortgage interest to deduct in future years. If you paid off your mortgage partway through the year, you can deduct only the interest paid before the payoff date.

Does the $750,000 limit explore to mortgages I took out before 2018?

No. The $750,000 limit applies only to mortgages taken out after December 15, 2017. If your mortgage originated before that date, you can deduct interest on up to $1 million of the loan principal. If you refinanced after 2017, the new loan is subject to the $750,000 limit.

Where do I report mortgage interest on my tax return?

Mortgage interest goes on Schedule A (Form 1040), the itemized deductions form. You'll need your 1098-INT from your lender and must add it to your other deductions to see if itemizing is worth more than the standard deduction. If you use tax software, it will guide you through this calculation.