Tax season hits differently when you’re looking at a massive mortgage payment and wondering if Uncle Sam is actually going to chip in. Most people think there’s a hard "cliff"—a specific dollar amount where the IRS just shuts the door on your write-offs. They assume that if they earn one dollar over a certain limit, the deduction vanishes.
It doesn’t work like that.
Honestly, the question of at what income level do you lose mortgage interest deduction is a bit of a trick. There isn't a single "income cap" that disqualifies you. Instead, you "lose" the deduction through a combination of the standard deduction hurdle, loan limits, and how you use the money. You could make $50,000 and "lose" it because the standard deduction is better for you. Or you could make $5 million and still deduct a significant chunk of change.
The Standard Deduction is the Real "Income" Barrier
For the vast majority of Americans, the mortgage interest deduction is effectively dead, not because of their high income, but because the standard deduction is so high. Ever since the Tax Cuts and Jobs Act (TCJA) of 2017, the bar to entry has been shifted. For the 2025 and 2026 tax years, the standard deduction for a married couple filing jointly is hovering around $30,000 (adjusted for inflation).
Think about that.
To even use the mortgage interest deduction, your total itemized deductions—including mortgage interest, state and local taxes (SALT) capped at $10,000, and charitable giving—must exceed that $30,000 mark. If you earn $150,000 a year but your mortgage interest is only $12,000, you aren't "losing" the deduction because of your income. You're "losing" it because the IRS is giving you a better deal for free.
Basically, unless you have a massive mortgage or live in a high-tax state like California or New York, itemizing just doesn't make sense anymore. It’s a math problem, not a wealth tax.
✨ Don't miss: Starting Pay for Target: What Most People Get Wrong
The $750,000 Loan Limit Catch
If we’re talking about where high earners actually start feeling the squeeze, we have to look at the loan balance. For mortgages taken out after December 15, 2017, you can only deduct interest on the first $750,000 of qualified residence loans.
If you’re a high-income earner and you just bought a $2 million brownstone in Brooklyn with a $1.6 million mortgage, you are "losing" the deduction on more than half of your interest. It doesn't matter if you make $200,000 or $2 million; that $750,000 ceiling is firm. If you bought your home before that 2017 cutoff, you might be "grandfathered" in at the old $1 million limit.
It’s a weird quirk of tax law. Two neighbors can have the exact same income and the exact same house, but if one bought in 2016 and the other in 2024, their tax bills will look wildly different.
Pease Limitations: A Ghost of Taxes Past
People often ask about at what income level do you lose mortgage interest deduction because they remember something called the "Pease Limitation." This was a rule that used to phase out itemized deductions for high-income earners. If you made over a certain amount, the IRS started clawing back your write-offs.
Here’s the kicker: The TCJA suspended the Pease Limitation through the end of 2025.
As of right now, there is no "phase-out" based strictly on your Adjusted Gross Income (AGI). If you have $100,000 in legitimate interest on a grandfathered million-dollar loan, you can deduct it even if you earned $10 million this year. However, keep an eye on the calendar. Many of these provisions are set to sunset at the end of 2025. If Congress doesn't act, the old income-based phase-outs could come screaming back in 2026, making your income level very relevant again.
🔗 Read more: Why the Old Spice Deodorant Advert Still Wins Over a Decade Later
The SALT Cap Squeeze
You can’t talk about mortgage deductions without talking about the SALT cap. Since you have to itemize to get the mortgage benefit, you’re also looking at your State and Local Taxes. The law currently caps this at $10,000.
For high-income earners in states like New Jersey or Connecticut, their property taxes alone might be $25,000. But the IRS only lets them count $10,000 toward that "hurdle" we talked about earlier. This makes it much harder for even wealthy people to justify itemizing unless their mortgage interest is substantial.
It’s a indirect way that higher-income people in specific geographies "lose" the full weight of their home-related tax breaks.
Second Homes and Home Equity Loans
Maybe you’re doing well and you bought a cabin in Tahoe. You can still deduct interest on a second home, but the $750,000 total limit applies to the combined balance of both loans. You don't get a fresh $750,000 for the vacation spot.
And if you took out a Home Equity Line of Credit (HELOC) to pay for your kid’s college or buy a boat?
Forget it.
💡 You might also like: Palantir Alex Karp Stock Sale: Why the CEO is Actually Selling Now
The IRS changed the rules so that interest on home equity debt is only deductible if the money is used to "buy, build, or substantially improve" the home that secures the loan. If you used that money for anything else, you lose the deduction entirely, regardless of whether you make $30,000 or $300,000.
How to Tell if You’ve "Lost" the Deduction
The easiest way to figure this out is to look at your Form 1098, which your lender sends every January. Look at Box 1. That’s the interest you paid.
- Add that number to your charitable donations for the year.
- Add up to $10,000 of your state/local taxes.
- Compare that total to the standard deduction for your filing status ($15,000 for singles, $30,000 for married couples—roughly).
If your total is lower than the standard deduction, you’ve "lost" the deduction. Not because you're too rich or too poor, but because the math just isn't in your favor.
Actionable Steps for Tax Planning
Stop waiting for a specific income threshold to hit. It's about strategy.
First, check your loan date. If you're looking to refinance a "grandfathered" $1 million mortgage, be careful. Refinancing into a new loan might subject you to the newer, lower $750,000 limit. You could literally talk yourself out of a tax break just by chasing a slightly lower interest rate.
Second, consider "bunching" your deductions. If you’re close to the standard deduction limit, you might choose to make two years' worth of charitable donations in one year. This pushes your itemized total well above the standard deduction, allowing you to actually feel the benefit of your mortgage interest for at least that one tax year.
Finally, keep meticulous records of home improvements. If you use a HELOC to renovate your kitchen, that interest remains deductible. If you use it to consolidate credit card debt, it isn't. Keeping those receipts is the difference between a tax win and an audit headache.
The reality of the current tax code is that it favors simplicity for the middle class and puts a hard ceiling on the wealthy. You don't lose the deduction because you're successful; you lose it because the rules are designed to limit how much the government subsidizes expensive real estate. Know your numbers, track your loan balances, and stop worrying about a "cliff" that doesn't exist.