Section: Everyone Guides
Author: Susan Isaacs, Washington DC Real Estate Strategist
Mortgage Interest Deduction For DC Homeowners
One of the perks of ownership, but it’s not as much of an advantage as it used to be for large mortgage loans.
What Is The Mortgage Interest Deduction?
The home mortgage interest deduction allows mortgagees to reduce taxable income from the prior year by the total interest paid on mortgage debt up to $750k.
Is It Still a Relevant Deduction For Homeowners?
The mortgage interest deduction is much less relevant for most taxpayers today because high standard deduction amounts mean very few people itemize their taxes.
For the 2025 tax year, the standard deduction is $15,750 for single filers and $31,500 for married couples filing jointly. For itemizing to make a difference, the filer must exceed those thresholds;
You can’t take the standard deduction and claim mortgage interest;
Changes from the Tax Cuts and Jobs Act raised the standard deduction significantly, causing the percentage of taxpayers who itemize to fall.
Mortgage Interest Deduction Rules and Limits
For new loans closed after December 15, 2017, the maximum mortgage principal eligible for the deductible interest is $750,000 of mortgage debt ($375,000 if married filing separately), which was lowered by TCJA. Loans closed before that date retain their pre-TCJA $1 million limit ($500,000 for married filing separately) unless the property is refinanced;
Standard deductions were nearly doubled by TCJA;
The mortgage must be secured by a primary residence or second home, and the loan funds must have been used used to purchase, build, or vastly improve the property;
Mortgages higher than the cap still get a deduction, but only on the portion of interest related to the first $750,000.
Lenders send form 1098 for filers who pay $600 or more in mortgage interest during the year. Review IRS Publication 936 for official guidelines.
Home Equity Loans (HELOC)
TCJA also partially eliminated the ability to deduct interest on home equity debt. Homeowners can deduct the interest only if it’s used to buy, build, or improve the property and doesn’t bring your total outstanding mortgage debt above the revised $750k limit. This change took immediate effect, even on existing home equity loans, with no grandfathering provisions.
Previously, homeowners were able to deduct interest on up to $100,000 of home equity debt. The law allowed for unrestricted use of the funds, with the interest still being deductible.
Capital Gains Tax
1031 Exchanges
What Counts As Mortgage Interest When Taking The Itemized Deduction?
The portion of your total mortgage payment that goes toward paying interest:
Points paid during the initiation of your mortgage
Private mortgage insurance
The increase in the standard deduction effectively eliminated the tax benefit of paying home mortgage interest. If the total itemized deductions don’t exceed the raised standard deduction, taxpayers won’t itemize, and the mortgage interest is not deductible.
What The Mortgage Interest Deduction Allows
A mortgage interest deduction allows homeowners to reduce their taxable income by the interest paid on the loan which is secured by their principal residence (or, sometimes, a second home)
If a home buyer earned $100,000 a year, paid $10,000 the previous year in interest and claimed the mortgage interest deduction, the IRS would tax only $90,000 of the income (not including additional deductions)
The IRS previously allowed deductions on interest for second homes or on home equity loans of $100,000. or less and for mortgages of $1M dollars or less
The mortgage interest deduction was beneficial for homeowners within the first five years of their purchase since the majority of the typical conventional mortgage loan monthly payment goes to interest, not principal, during that time.
Sources
Disclaimer
We are not attorneys, legal experts, investment counselors, or CPAs. The content on this channel is presented for informational purposes only and derived from reliable sources, but should not be considered legal, financial, investment, transaction or real estate practice advice. Susan Isaacs and Compass, their principals and/or representatives, do not guarantee or warrant its accuracy, completeness, or applicability to any specific real estate transaction. Homebuyers should read applicable D.C. law and code as part of their due diligence, and seek help from licensed, qualified professionals for interpretation and application to their specific transaction.