Mortgage Interest and PMI Deductions in 2026: What the New Tax Law Changed
The permanent $750,000 limit, the return of the mortgage insurance deduction from 2026, the higher SALT cap, home equity interest rules and a simple test of whether itemizing beats the standard deduction.
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Key takeaways
- Interest on up to $750,000 of mortgage debt ($375,000 if married filing separately) remains deductible, now permanently. Loans from before December 16, 2017 keep the $1 million limit.
- Mortgage insurance premiums (PMI, FHA MIP, VA funding fees, USDA guarantee fees) are deductible again from 2026, phasing out between $100,000 and $109,000 of AGI.
- The SALT deduction cap is $40,400 for 2026, reduced for incomes above $505,000.
- You benefit only if itemized deductions exceed the 2026 standard deduction of $16,100 (single) or $32,200 (joint).
The 2025 tax law settled several questions homeowners had been asking since 2017. Some temporary limits became permanent, one deduction came back and the cap on state and local taxes went up. Whether any of this lowers your own tax bill depends on one comparison: your itemized deductions against the standard deduction.
Please note
General information about U.S. federal tax rules for tax year 2026 as of October 2026; not tax advice. Your lender reports mortgage interest and, where applicable, mortgage insurance on Form 1098.
What changed and what stayed
| Rule | Status for 2026 |
|---|---|
| Mortgage debt limit for interest | $750,000 ($375,000 MFS), made permanent |
| Loans before December 16, 2017 | $1,000,000 limit continues |
| Home equity interest | Deductible only if used to buy, build or substantially improve the home |
| Mortgage insurance premiums | Deductible again from 2026, with an AGI phase-out |
| SALT cap (state/local income or sales tax plus property tax) | $40,400 ($20,200 MFS), phased down above $505,000 MAGI |
| Standard deduction | $16,100 single, $24,150 head of household, $32,200 joint |
The mortgage interest deduction
Interest on acquisition debt, meaning loans used to buy, build or substantially improve your main home or one second home, is deductible on Schedule A up to the debt limit. Points paid to obtain a purchase mortgage are generally deductible too. If your mortgage exceeds the limit, only a proportional share of the interest is deductible; IRS Publication 936 has the worksheet.
Mortgage insurance is deductible again
Starting with tax year 2026, the law permanently treats mortgage insurance premiums as qualified residence interest. That covers private mortgage insurance on conventional loans, FHA mortgage insurance premiums, the VA funding fee and USDA guarantee fees, for contracts issued after 2006. The deduction is reduced by 10% for each $1,000, or fraction of $1,000, of AGI above $100,000 ($50,000 if married filing separately), so it is gone entirely once AGI exceeds $109,000. An FHA borrower with AGI of $100,000 or less who itemizes and pays about $1,600 a year of MIP, as in our FHA example, could deduct that amount.
Home equity loans and HELOCs
Interest on a home equity loan or HELOC is deductible only when the money is used to buy, build or substantially improve the home that secures it, and it counts toward the $750,000 limit. Paying off cards or a car with home equity creates no deduction. Details in HELOC vs. home equity loan.
Does itemizing pay for you? Two examples
Married couple
Mortgage interest $18,000, property and state taxes $9,000, mortgage insurance $1,500, charitable gifts $1,200: $29,700 in itemized deductions. That is below the $32,200 joint standard deduction, so they take the standard deduction and the mortgage deductions give no extra benefit.
Single buyer
Mortgage interest $15,000, state and property taxes $8,000, mortgage insurance $1,200, charitable gifts $800: $25,000. That exceeds the $16,100 standard deduction by $8,900; in the 22% bracket, itemizing saves about $1,960 of federal tax.
Single homeowners with sizable mortgages benefit most. Many married couples still find the standard deduction larger, especially as the mortgage balance and its interest shrink over time.
Records to keep
- Form 1098 from your servicer, showing interest, points and mortgage insurance.
- Your Closing Disclosure from the purchase or refinance, which shows points paid.
- Receipts for improvements financed with home equity, to support the use of funds.
- Property tax bills, which may be paid through escrow; see escrow shortages explained.
Frequently asked questions
Is PMI tax deductible in 2026?
Yes. From tax year 2026, mortgage insurance premiums are deductible as mortgage interest if you itemize, with a phase-out between $100,000 and $109,000 of AGI.
Is the mortgage interest limit still $750,000?
Yes, and the 2025 law made it permanent. Mortgages taken out before December 16, 2017 keep the $1 million limit.
Can I deduct mortgage interest without itemizing?
No. Mortgage interest and mortgage insurance are itemized deductions on Schedule A.
Is interest on a second home deductible?
Yes, for one second home, as long as total qualifying mortgage debt stays within the limit.
What is the SALT cap for 2026?
$40,400 ($20,200 if married filing separately), reduced by 30% of modified AGI above $505,000, but not below $10,000.
