One of the many changes in the new tax law that may impact you is the mortgage interest deduction. This is still a favorite deduction despite the significant increase in the standard deduction.

It is important to first understand how the IRS defines “qualified residence debt,” which would be a loan that is used for purchasing, building, or substantially improving your primary or secondary home. Any loans for investment properties would not be qualified. In addition, the loan must be secured by the qualified home and cannot exceed the cost of the home.

Under the old law, we could deduct the mortgage interest on combined “qualified residence debt” up to $1 million if married filing jointly ($500,000 if married filing separately); however, through tax year 2025, the limit has been reduced to $750,000 ($325,000 if married filing separately). This new principal limit applies to all loans originating on or after December 15, 2017.

Two large exceptions to this new rule should be considered. One exception is that if your loan originated before December 15, 2017, then it can be “grandfathered in” and remain under the old limits. A second exception is that if you refinance a loan,and the new loan amount does not exceed the current principal debt, then it will have the same origination date as the first loan; and, therefore, the old limits would still apply.

Another change made by the TCJA on the mortgage interest deduction relates to interest on home-equity loans. Previously, you could deduct interest on home-equity loans up to $100,000, regardless of how the loan was used. Under the new law, the home-equity loan must meet the definition of “qualified residence debt,” addressed above, for the interest to be deducted. For example, renovations to your primary or secondary home would qualify but, personal expenses such as paying off credit card debt, student loans, or buying a boat would not. Any home-equity debt that does not qualify cannot be “grandfathered in” and the interest in no longer deductible, even if it originated before the new law. On the plus side, there is not a debt cap of $100,000 anymore, but it does still fall under the $750,000 cap for “qualified residence debt.”

In closing, two major modifications have been made to the mortgage interest deductions – a lower cap on the “qualified residence debt” for newly originating loans and the exclusion of interest on home-equity debt used for personal expenses. There are various circumstances and details to take into consideration regarding the mortgage interest deduction that are not covered in this article, so be sure to discuss your unique circumstances with a professional advisor to take maximum advantage of this deduction.

Leyna Ford, CPA

Leyna Ford, CPA is a Staff Accountant with GranthamPoole, specializing in corporate & individual taxation, estate & gift planning, and trusts. For more information on the above article or any other TCJA or tax-related topics, please contact your GranthamPoole tax advisor or our Tax Services Team Leader, Melanie Woodrick, CPA at 601.499.2400 or

The above does not represent tax advice. Each situation is fact-dependent, and you should seek the advice of a competent advisor. GranthamPoole PLLC is a provider of tax, accounting, advisory and strategic services, partnering with clients across a broad spectrum of industries and sizes.

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