TL;DR
- Primary home: Mortgage interest is deductible on up to $750,000 of acquisition debt ($375,000 if married filing separately), but only if your total itemized deductions beat the standard deduction. Many homeowners no longer itemize.
- New for 2026: Mortgage insurance premiums (PMI/MIP) are deductible again as qualified residence interest, phasing out above $100,000 AGI.
- Property taxes count toward the SALT deduction, capped at roughly $40,400 for 2026 (up from $10,000), reverting to $10,000 in 2030.
- Investment property: Mortgage interest is a business expense, not subject to the $750,000 cap, deductible whether or not you itemize. You can also deduct depreciation, repairs, insurance, and management.
- Depreciation is the big one for investors: Residential rentals depreciate over 27.5 years, and OBBBA restored 100% bonus depreciation for qualifying components.
- Strategy is mostly about timing and structure, and most of it requires a CPA. This page tells you what to ask about.
Primary residence: what you can deduct
Educational only, not tax advice. Confirm anything here with your own qualified tax professional.
What mortgage interest can you deduct on your home?
You can deduct the interest on up to $750,000 of home acquisition debt ($375,000 if married filing separately) for loans taken after December 15, 2017. Mortgages in place on or before that date keep the older $1,000,000 limit ($500,000 if married filing separately). "Acquisition debt" means money borrowed to buy, build, or substantially improve the home that secures the loan. The $750,000 cap is now permanent under the One Big Beautiful Bill Act. (Source: IRS Publication 936; IRC Section 163(h)(3); Public Law 119-21.)
The deduction is taken on Schedule A, which means it only helps if your itemized deductions exceed the standard deduction. For 2026 the standard deduction is approximately $16,100 for single filers and married filing separately, $32,200 for married filing jointly, and $24,150 for heads of household. (Source: IRS 2026 inflation-adjustment release reflecting the One Big Beautiful Bill Act.)
Are mortgage insurance premiums (PMI) deductible in 2026?
Yes, starting with the 2026 tax year, premiums for qualified mortgage insurance are again treated as deductible qualified residence interest. This covers PMI on conventional loans, plus FHA, VA, and USDA guarantee/funding fees treated as mortgage insurance, when the insurance covers acquisition debt on a qualified home. The deduction begins to phase out above $100,000 AGI ($50,000 if married filing separately), reduced by 10 percent for each $1,000 of AGI over the threshold, and is fully phased out by roughly $109,000 to $110,000 AGI. You must itemize to claim it. (Source: OBBBA Section 70108 amending IRC Section 163(h)(3)(F); IRS Publication 936.)
Can you deduct your property taxes?
Property taxes are deductible as part of the State and Local Tax (SALT) deduction, which also includes state income or sales tax. For 2026 the SALT cap is approximately $40,400 (up from $10,000), phasing down for taxpayers with MAGI above $500,000 and reverting to $10,000 in 2030. Like mortgage interest, this only matters if you itemize. (Source: OBBBA; IRC Section 164; IRS Schedule A instructions.)
Are mortgage points deductible?
Points (also called loan origination fees or discount points) paid to buy a primary home are generally deductible in full in the year paid, if they meet IRS conditions. Points paid on a refinance usually must be deducted gradually over the life of the loan. (Source: IRS Topic No. 504; Publication 936.)
Is home equity loan or HELOC interest deductible?
Only if you used the borrowed money to buy, build, or substantially improve the home that secures the loan, and the total still fits within the $750,000 acquisition-debt cap. Interest on home equity debt used for other purposes (paying off credit cards, buying a car, tuition) is not deductible. This restriction is now permanent under OBBBA. (Source: IRS Publication 936; IRC Section 163(h)(3).)
The honest caveat: most homeowners do not itemize
Because the standard deduction is large, a typical homeowner with a moderate loan balance may find that their mortgage interest plus property tax plus other itemized deductions still total less than the standard deduction. In that case, itemizing the mortgage produces no extra tax benefit. The deduction is real, but it is not automatic, and it is worth the most to people with larger loan balances, higher property taxes, or significant charitable giving. A tax professional can run both methods and tell you which wins.
Investment property: what you can deduct
Educational only, not tax advice. Confirm anything here with your own qualified tax professional.
Investment and rental property is taxed very differently. Instead of itemizing on Schedule A, you report rental income and expenses on Schedule E as a business activity. That changes the math in your favor in several ways.
Related: Investment property and DSCR loans
Is mortgage interest on a rental property deductible?
Yes, and it is not subject to the $750,000 primary-residence cap. Mortgage interest on a property held to produce rental income is an ordinary business operating expense, deductible against your rental income on Schedule E, whether or not you itemize your personal deductions. (Source: IRS Publication 527; Schedule E instructions.)
What is depreciation, and why does it matter so much?
Depreciation lets you deduct a portion of the building's cost each year to account for wear and tear, even though you did not spend new cash that year. Residential rental buildings are depreciated straight-line over 27.5 years (nonresidential over 39 years). Land is not depreciable, only the structure and qualifying improvements. For many investors, depreciation is the single largest paper deduction and is what allows a profitable rental to show little or no taxable income. (Source: IRS Publication 946; IRC Section 168; Form 4562.)
What did OBBBA change for investors?
The One Big Beautiful Bill Act permanently restored 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025. This lets you immediately expense the full cost of shorter-life components such as appliances, flooring, HVAC, cabinetry, and certain land improvements, instead of recovering them over many years. A cost segregation study is the tool investors use to identify which parts of a building qualify. OBBBA also made the 20% Qualified Business Income (QBI) deduction permanent for rental activity that rises to the level of a trade or business. (Source: OBBBA; IRC Section 168(k); IRS Notice 2026-11; IRC Section 199A.)
What other rental expenses are deductible?
Common Schedule E deductions include property taxes, insurance, repairs and maintenance, property management fees, advertising, utilities you pay, HOA dues, travel related to the property, and professional fees. Routine repairs are deducted in the year paid; major improvements are capitalized and depreciated. A de minimis safe harbor lets you immediately expense many lower-cost items rather than depreciating them. (Source: IRS Publication 527; Treasury Reg. Section 1.263(a).)
What are the catches investors should know about?
- Passive activity loss rules can limit how much rental loss you may use against other income in a given year. A special allowance of up to $25,000 may apply for active participants, phasing out between $100,000 and $150,000 MAGI. (Source: IRS Publication 925; IRC Section 469.)
- Depreciation recapture means the depreciation you claimed is generally taxed when you sell, at a federal rate up to 25%. (Source: IRS Publication 544.)
- State non-conformity matters. Some states (California, for example) do not follow federal bonus depreciation, so the state result differs from the federal one.
Primary residence vs investment property at a glance
Educational only, not tax advice. Confirm anything here with your own qualified tax professional.
| Item | Primary residence | Investment / rental property |
|---|---|---|
| Where reported | Schedule A (itemized) | Schedule E (business) |
| Requires itemizing? | Yes | No |
| Mortgage interest | Deductible up to $750k acquisition debt | Deductible, no $750k cap |
| Mortgage insurance (PMI) | Deductible from 2026, AGI phase-out | Deductible as a business expense |
| Property taxes | Within SALT cap (~$40,400 for 2026) | Fully deductible against rental income |
| Depreciation | Not available | 27.5-year building + bonus depreciation |
| Points | Deductible (refi amortized) | Amortized over loan term |
| Repairs / management | Not deductible | Deductible |
Source: IRS Publications 936, 527, 946; IRC Sections 163, 164, 168, 199A; OBBBA (Pub. L. 119-21) (as of 2026 tax year).
Common strategies people ask their CPA about
Educational only, not tax advice. Confirm anything here with your own qualified tax professional.
The items below are concepts to discuss with a tax professional, not recommendations. Whether any of them helps you depends entirely on your numbers.
- Run itemize-vs-standard every year. Whether your mortgage interest produces a benefit can flip year to year as your balance, property taxes, and giving change. This is a yearly comparison, not a one-time decision.
- Timing of points and prepaid interest. When you pay points and prepaid interest can affect which tax year the deduction lands in.
- Cost segregation on rentals. Breaking a building into shorter-life components can accelerate depreciation, especially now that 100% bonus depreciation is permanent. It involves a study and a cost, so it makes the most sense above a certain property value.
- 1031 like-kind exchanges. Investors use these to defer capital gains tax by rolling proceeds from one investment property into another, within strict 45-day and 180-day deadlines. (Source: IRC Section 1031.)
- Keeping clean records. Every deduction rests on documentation: Form 1098 from your servicer, closing statements, repair invoices, and a depreciation schedule. Good records are what turn an eligible deduction into a claimed one.
- How refinancing affects deductibility. Cash-out refinances can change how much of your interest stays deductible, because only the portion tied to acquiring or improving the home counts toward the cap.
A mortgage is one input into your tax picture. The structure of the loan, the down payment, and how you title and use the property all interact with the tax rules above, which is exactly why this should be a conversation between you and a tax professional, with your loan officer providing the mortgage facts they need.
Frequently asked questions
Educational only, not tax advice. Confirm anything here with your own qualified tax professional.
Glossary
- Acquisition debt
- Money borrowed to buy, build, or substantially improve the home that secures the loan. Mortgage interest is deductible only on acquisition debt within the applicable cap.
- SALT deduction
- The itemized deduction for state and local taxes, including property tax and state income or sales tax, capped at roughly $40,400 for 2026 and reverting to $10,000 in 2030.
- Qualified mortgage insurance premium
- PMI on a conventional loan, or FHA, VA, or USDA fees treated as mortgage insurance, that beginning in 2026 may be deductible as qualified residence interest, subject to an AGI phase-out, if you itemize.
- Discount points
- Prepaid interest (also called origination or discount points) paid to a lender. Points to buy a primary home may be deductible in the year paid; refinance points are generally amortized over the loan term.
- Depreciation
- An annual deduction that recovers the cost of an income-producing building over its tax life, 27.5 years for residential rentals and 39 years for nonresidential, excluding land.
- Bonus depreciation
- An immediate deduction of the full cost of qualifying shorter-life property, restored to 100% by OBBBA for property acquired and placed in service after January 19, 2025.
- Cost segregation
- A study that breaks a building into shorter-life components so more of its cost can be depreciated faster, often paired with bonus depreciation.
- 1031 like-kind exchange
- A transaction that defers capital gains tax by reinvesting proceeds from one investment property into another, subject to strict 45-day and 180-day deadlines.
- Qualified Business Income (QBI)
- A deduction of up to 20% of qualifying business income, made permanent by OBBBA, available for rental activity that rises to the level of a trade or business.
- Passive activity loss
- A loss from a rental or other passive activity, the use of which against other income can be limited, with a special allowance of up to $25,000 that phases out between $100,000 and $150,000 MAGI.
- Depreciation recapture
- Tax owed at sale on the depreciation previously claimed, generally at a federal rate up to 25%, unless deferred through a strategy such as a 1031 exchange.
- Schedule A vs Schedule E
- Schedule A is where homeowners itemize personal deductions like mortgage interest and SALT; Schedule E is where investors report rental income and business expenses, including mortgage interest, depreciation, and management.
Talk to a tax professional
Your mortgage is one piece of your tax picture, and Niko does not prepare taxes. The right next step is to take your specific situation to your own qualified tax professional, a CPA or an Enrolled Agent, who can apply these rules to your income, filing status, and state. Bring your loan officer in for the mortgage facts your tax professional needs, your Form 1098, your closing statement, and the details of how each property is used and financed. That combination, your tax professional on the tax questions and your loan officer on the mortgage facts, is what gets you accurate answers.