Mortgage Interest Deduction in 2026: What Homeowners Should Know Before Tax Rules Shift

Overview

The mortgage interest deduction is a valuable benefit for homeowners, but with upcoming tax changes in 2026, it could affect who qualifies and how much can be deducted. As key provisions from the Tax Cuts and Jobs Act (TCJA) are set to expire, there could be more opportunities for homeowners to itemize deductions again. Here's a closer look at what these changes mean for homeowners.

Current Mortgage Interest Deduction Rules

Under current law, homeowners can deduct mortgage interest on loans up to $750,000 for homes purchased after 2017. The $1 million cap still applies to older loans. However, the $10,000 SALT (state and local tax) deduction cap and high standard deduction levels have reduced the number of taxpayers opting to itemize. Many homeowners with moderate mortgage balances or lower tax liabilities find that taking the standard deduction is more beneficial.

What Could Change in 2026

Several tax provisions set to expire after 2025 could make the mortgage interest deduction more beneficial:

• Standard deduction changes: If the standard deduction decreases, more taxpayers might find it worthwhile to itemize.
• SALT cap expiration: If the $10,000 SALT cap expires, homeowners in high-tax states could benefit from higher state and local tax deductions, potentially making it easier to exceed the standard deduction threshold and itemize.
• Potential return to $1 million mortgage cap: Although the current mortgage cap is $750,000, there’s a possibility that it could revert to $1 million, allowing homeowners with larger mortgages to deduct more interest. This change would require new legislation, however.

These changes may open the door for many homeowners to benefit more from itemizing their deductions, especially in high-property-value or high-tax regions.

Who Stands to Benefit

Homeowners most likely to benefit from these potential changes include:

• Those with larger mortgage balances: If the $1 million cap returns, homeowners with higher mortgage balances may see a larger deduction.
• Residents of high-property-value or high-tax states: The expiration of the SALT cap could make it more beneficial for homeowners in these areas to itemize.
• Homebuyers and refinancers: Those planning to buy or refinance before or after 2026 may be able to lock in more favorable terms and tax benefits.

Planning Strategies Before 2026

If you’re a homeowner or prospective buyer, there are several steps you can take to prepare for potential changes:

• Evaluate loan timing: If you’re planning a home purchase or refinancing, consider doing so before 2026 to lock in deductions under current laws or ahead of potential changes.
• Track deductible expenses: Maintain detailed records of property taxes, mortgage interest, and any home improvements that might qualify for deductions to support itemizing decisions.
• Consult a tax advisor: Work with a tax professional to evaluate whether itemizing will make sense for you in 2026, based on your mortgage, SALT deductions, and other factors.