Homeowners can get a tax break worth thousands of dollars—see if you're eligible

Owning a home is expensive, but it comes with one of the most valuable tax breaks available: the home mortgage interest deduction.

This rule lets homeowners deduct the interest they pay on their home loans, lowering their tax liability and reducing the amount they owe to the Internal Revenue Service in a given tax year. If your income is low and your deductions are large, it could reduce what you owe to the IRS to zero.

However, how much you can save depends on your loan size, interest rate and where you are in your repayment schedule. For a median-priced home of $419,200 with 20% down and a 6.8% interest rate, that adds up to more than $20,000 in annual interest costs in the early years of the loan.

There is a catch though: To qualify for the tax break, you need to itemize your deductions, which only about 10% of tax filers do, according to TurboTax.

Most taxpayers take the standard deduction instead — a set amount the IRS lets you subtract from your income. For the 2024 tax year, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly.

To benefit from itemizing, your total eligible deductions — including mortgage interest, property taxes, charitable contributions and state and local taxes (SALT) — need to exceed the standard deduction.

How to know you're eligible for the mortgage interest tax deduction

Most homeowners who pay interest on a home loan can use the mortgage interest deduction. There's no income limit to qualify, but how much you can deduct depends on your mortgage size and when you got the loan.

For mortgages originated after Dec. 15, 2017, you can deduct interest on up to:

For older mortgages — originated on or before Dec. 15, 2017 — the limits are higher:

The mortgage interest deduction applies to a range of loans, including traditional mortgages and other financing. Eligible loans include:

You can also deduct interest on mortgage points, which are fees paid to lower your interest rate, as long as your loan falls within the applicable limits.

However, the mortgage interest deduction does not apply to mortgage principal payments, down payments or mortgage insurance premiums.

To claim the deduction, you'll need to itemize your deductions on IRS Form 1040 Schedule A. Fortunately, most tax software can walk you through the process to help you get the most out of your savings.