Mortgage Interest Deduction and Form 1098: The Basics
Published November 4, 2026
Mortgage interest is often one of the largest items on Schedule A. It is also easy to misread. This post explains the rules using IRS Publication 936 (2025), the most recent edition we could verify. It covers tax year 2025. Tax year 2026 numbers appear only where noted.
What the deduction covers
You can deduct home mortgage interest only if you itemize on Schedule A (Form 1040). The loan must also be secured by a qualified home, and you must have an ownership interest in that home. A qualified home is your main home or a second home. IRS: Publication 936 (2025)
The acquisition debt limit
Acquisition debt is a mortgage used to buy, build, or substantially improve the home that secures it. The dollar limit depends on when the loan was taken out:
- Loans taken out after December 15, 2017: the limit is $750,000, or $375,000 if married filing separately.
- Loans taken out after October 13, 1987, and before December 16, 2017: the limit is $1,000,000, or $500,000 if married filing separately.
The limit covers the combined mortgages on your main home and second home. Mortgage debt from before October 14, 1987, is called grandfathered debt. Its interest is fully deductible, but its balance reduces the room left under the acquisition debt limit. IRS: Publication 936 (2025)
If your average balance is above the limit, only part of the interest is deductible. For example, a $900,000 loan from 2019 has interest allocated to the first $750,000. Table 1 in Publication 936 walks through that math. IRS: Publication 936 (2025)
Home equity loans and lines of credit
Interest on a home equity loan or line of credit is deductible only if you used the borrowed money to buy, build, or substantially improve the home that secures the loan. Using it to pay off a car, cover tuition, or pay credit card bills does not qualify. IRS: Publication 936
Repairs that keep your home in good condition, such as repainting, are not substantial improvements.
Points
Points are prepaid interest paid to get a mortgage. They are also called discount points. Points you pay to buy your main home may be deductible in full in the year you pay them, if they meet the tests in Publication 936. One test is that the amount is clearly shown as points on the settlement statement.
Points that do not meet those tests are generally deducted over the life of the loan. This includes points on a new loan that replaces an older mortgage. Points on a home equity loan are not deductible unless the loan money was used to buy or improve the home. IRS: Publication 936 (2025)
If the seller paid points on your loan, you are treated as having paid them for purposes of this rule.
Form 1098
Your lender sends Form 1098 if you paid $600 or more of mortgage interest in the year. The statement should arrive by January 31 of the next year. IRS: Publication 936 (2025) IRS: Form 1098
The main boxes are:
- Box 1 shows mortgage interest received by the lender. A home equity loan can appear here even when its interest is not deductible.
- Box 4 shows refunded interest. Do not deduct this amount. You may need to report it as income if you deducted that interest in an earlier year.
- Box 5 shows mortgage insurance premiums you paid.
- Box 6 shows points paid for the purchase of your main home that must be reported.
Box 1 may include prepaid interest that accrued in full by January 15 of the next year. You cannot deduct the part that covers the next year in the year you paid it. IRS: Form 1098 (Rev. April 2025)
Where it goes on Schedule A
- Line 8a: interest and points reported to you on Form 1098.
- Line 8b: deductible interest not reported on Form 1098.
- Line 8c: deductible points not reported on Form 1098.
- Line 8e: the total of lines 8a through 8c.
Schedule A line 17 carries your total itemized deductions to Form 1040, line 12e. IRS: 2025 Schedule A (Form 1040)
When itemizing makes sense
You should itemize when your allowable itemized deductions add up to more than your standard deduction. Mortgage interest is only one part of that total. Others include state and local taxes, charitable gifts, and medical costs above 7.5% of your adjusted gross income. IRS: Topic 501, Should I itemize?
For tax year 2025, the standard deduction is $15,750 for single filers, $31,500 for married filing jointly, and $23,625 for heads of household. For tax year 2026, it is $16,100, $32,200, and $24,150. IRS: Rev. Proc. 2025-32 IRS: 2026 inflation adjustments
As an example, a married couple with $12,000 of mortgage interest and $6,000 of state and local taxes has $18,000 in those two items. That is below the 2025 joint standard deduction of $31,500, so the standard deduction is the better choice unless other itemized costs push the total higher.
If you are married filing separately and your spouse itemizes, you must itemize too. IRS: Topic 501
Checklist
- Confirm the mortgage is secured by a home you own and that it is your main or second home.
- Note the loan date and balance. Check which dollar limit applies.
- Track how you used any home equity loan money.
- Compare Form 1098 boxes 1, 4, 5, and 6 with your own records.
- Keep your settlement statement. It shows any points paid.
- Add your itemized deductions and compare the total with your standard deduction.
General information, not advice for your return.
Sources: IRS Publication 936 (2025), Home Mortgage Interest Deduction (https://www.irs.gov/pub/irs-pdf/p936.pdf); IRS Form 1098, Rev. April 2025 (https://www.irs.gov/pub/irs-pdf/f1098.pdf); About Form 1098 (https://www.irs.gov/forms-pubs/about-form-1098); 2025 Schedule A (Form 1040) (https://www.irs.gov/pub/irs-pdf/f1040sa.pdf); IRS Topic 501, Should I itemize? (https://www.irs.gov/taxtopics/tc501); Rev. Proc. 2025-32, 2025 and 2026 standard deduction (https://www.irs.gov/pub/irs-drop/rp-25-32.pdf); IRS 2026 inflation adjustments (https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill) This is general information, not advice about your specific return.
