The One Big Beautiful Bill Act (OBBBA) makes permanent the TCJA provision that limits itemized deductions for home mortgage interest (so-called qualified residence interest) to interest on the first $750,000 of your total home acquisition debt, or $375,000 if you use married filing separately status.
Home acquisition debt is from mortgage loans taken out to acquire or improve your principal residence and to acquire or improve one other residence, such as a vacation home.1
Thanks to another unfavorable TCJA provision that the OBBBB also made permanent, you cannot deduct interest on a home equity loan except to the extent you use the loan proceeds to acquire or improve your principal residence or a second residence. If you pass that test, the home equity loan balance must fit within the overall $750,000/$375,000 home acquisition debt limitation.2
Mortgage Insurance Premiums
Starting in 2026, the OBBBA may allow you to deduct premiums paid for qualified mortgage insurance that covers home acquisition debt. The mortgage insurance contract must have been issued after 2006.
The allowable deduction for mortgage insurance premiums will be considered part of your qualified residence interest deduction.
But the mortgage insurance deduction will begin to be phased out once your AGI exceeds $100,000, or $50,000 if you are married and file separately. The phase-out amount will equal 10 percent of the otherwise allowable deduction for each $1,000 that your AGI exceeds the applicable threshold, or each $500 if you use the married filing separately status. So, for an unmarried individual or married joint-filing couple, the mortgage interest deduction will be completely phased out if your AGI is $110,000 or higher.3 Not so great!
Grandfathered Home Acquisition Debt
You may have home acquisition debt that receives more favorable treatment as a result of the “grandfather” rule, under which the reduced TCJA and OBBBA debt limits don’t apply.
Instead, you can deduct interest on up to $1 million of grandfathered home acquisition debt or up to $500,000 if you use married filing separately status.
Grandfathered debt
- Must have been taken out before December 16, 2017, under a binding contract that was entered into before December 15, 2017, and
- The home purchase must have closed before April 1, 2018.
The higher grandfathered debt limits also apply to grandfathered debt you refinanced to the extent that the initial principal balance of the new loan doesn’t exceed the principal balance of the old refinanced loan.4
How to Win
Itemizing homeowners can potentially deduct mortgage insurance premiums starting in 2026, but the OBBBA did not change the other existing rules for deducting home mortgage interest. Unfortunately, the ungenerous phase-out rule for deducting mortgage insurance premiums will make that deduction off limits for many folks. So, curb your enthusiasm.
Homeowners who itemize can still potentially take advantage of the higher SALT deduction limits to deduct more of their property taxes, and senior homeowners can potentially take advantage of the new bonus deduction. As explained earlier, some thoughtful tax planning might allow you to take full or partial advantage of those tax-savers on top of your home mortgage interest deduction. If so, we will call that a win!
Takeaways
The OBBBA locks in the $750,000 cap on deductible home acquisition debt interest and continues restrictions on home equity loan interest.
However, starting in 2026, you may be able to deduct mortgage insurance premiums—if your AGI is low enough to avoid the steep phase-out.
Homeowners with grandfathered debt predating December 16, 2017, may still benefit from the higher $1 million cap, and those who itemize should consider strategic planning to stack deductions, including SALT and senior bonus breaks, for a more favorable tax outcome.
1 IRC Section 163(h)(3) (F )(i)(II).
2 IRC Section 163(h)(3) (F )(i)(I).
3 IRC Sections 163(h)(3) (E ); 163(h)(3)(F)(i) (I II).
4 IRC Sections 163(h)(3)(F)(i) (I V); 163(h)(3)(F)(i)(V); 163(h)(3) (F )(ii).