How to Calculate the Home Mortgage Interest Deduction (HMID)
Learn how to determine your home mortgage interest deduction, including eligibility factors, deductible costs, and key documentation for accurate tax filing.
The home mortgage interest deduction (HMID) allows homeowners who itemize deductions to reduce their taxable income by the amount of mortgage interest paid. However, eligibility and deduction limits are subject to IRS rules.
Mortgage Debt Requirements
To qualify, the loan must be secured by a primary or secondary residence. If it is not secured by the property, the interest is not deductible.
As of 2024, homeowners can deduct interest on up to $750,000 of mortgage debt if filing jointly ($375,000 if married filing separately). These limits apply to loans taken out after December 15, 2017. Mortgages from before that date remain subject to the previous cap of $1 million ($500,000 for married filing separately). These thresholds apply to both primary and secondary residences combined.
For refinanced loans, the new mortgage remains deductible if it does not exceed the original loan balance. Any additional borrowed funds must be used for home improvements to qualify for interest deductibility.
Points and Origination Fees
Points, or discount points, are upfront fees paid to lower the mortgage interest rate. Origination fees cover administrative costs and do not affect the interest rate.
Points may be deductible in the year they are paid if the mortgage is for a primary residence and paying points is customary in the area. The payment must be itemized on the settlement statement and cannot be made with borrowed funds. If these conditions are not met, the deduction is spread over the loan term.
Origination fees are not deductible unless they are allocated to points that reduce the interest rate.
Private Mortgage Insurance
Private mortgage insurance (PMI) is required when a borrower’s down payment is less than 20% of the home’s price. PMI premiums were deductible under the Mortgage Insurance Tax Deduction, but this provision expired at the end of 2021 and is not available for 2024.
Since PMI does not build equity, eliminating it as soon as possible reduces costs. Borrowers can request cancellation once they reach 20% equity. Lenders must automatically terminate PMI when the loan balance reaches 78% of the home’s original value, provided payments are current.
Home Equity Interest
Interest on home equity loans (HELs) and home equity lines of credit (HELOCs) is deductible only if the funds are used to “buy, build, or substantially improve” the home securing the loan. Personal expenses such as debt consolidation or tuition do not qualify.
The deduction is subject to the overall mortgage debt limit of $750,000 for joint filers ($375,000 for married filing separately). Interest on home equity debt exceeding these thresholds is not deductible. The loan must also be secured by the taxpayer’s primary or secondary residence.
Multiple Properties
A second home qualifies for the deduction if it is not rented for more than 14 days per year or is used personally for at least 10% of the rented days. If primarily a rental, mortgage interest must be deducted as a rental expense on Schedule E instead of Schedule A.
Only the primary residence and one additional home qualify for the deduction. If total mortgage debt exceeds the allowed limit, taxpayers must allocate interest proportionally.
Documentation for Filing
Lenders issue Form 1098 annually, detailing mortgage interest paid. If a mortgage is held by a private lender, borrowers must maintain their own records and report the lender’s details on their tax return.
Taxpayers should retain closing statements, loan agreements, and proof of payments, particularly for points or refinanced loans. Documentation of home equity loan use is essential for IRS compliance. Keeping organized records simplifies tax filing and supports deduction claims in case of an audit.