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If you paid mortgage interest during the year, you might still be able to deduct it, even if you had no job or earned no wages that year. The IRS allows you to claim the mortgage interest deduction based on what you paid, not whether you worked. The real catch is whether you have enough taxable income to benefit from the deduction and whether itemizing beats taking the standard deduction.

How the Mortgage Interest Deduction Works

Mortgage interest has long been advertised as one of the biggest perks of homeownership. In the early years of a mortgage, most of your payment goes toward interest, so being able to deduct that amount seems like a financial win. But deducting mortgage interest is not automatic. You must itemize your deductions using Schedule A and that is where many taxpayers find the deduction less valuable than they expected.

The mortgage must also meet IRS rules. It needs to be secured by your home, and the money you borrowed must have been used to buy, build, or improve your primary or secondary home. A second home only qualifies if you use it personally for at least 15 days a year or 10% of the days it is rented out.

The Loan Limits That Really Matter

Tax law changes over the past decade have dramatically reshaped who benefits from this deduction. For most homeowners, the biggest shift came from the Tax Cuts and Jobs Act (TCJA), which lowered the mortgage size eligible for deductible interest from $1 million to $750,000. This cap applies to new loans taken after Dec. 16, 2017. Loans older than that generally follow the older $1-million limit.

These limits were originally scheduled to expire at the end of 2025. But the One Big Beautiful Bill Act made them permanent, removing uncertainty for borrowers going forward.

For homeowners who file separately from their spouse, the limits are cut in half: $375,000 instead of $750,000.

What Counts as Mortgage Interest?

The IRS definition of mortgage interest goes beyond the monthly payment. You can deduct more than you think, including interest on loans for your primary or second home, interest on a home equity line of credit (HELOC) used to improve the property, interest on mortgages for homes under construction, interest on mortgages for homes sold during the year up to the sale date, late payment fees and prepayment penalties and mortgage points, either all at once or over time.

But not all housing-related expenses are deductible. You cannot deduct your down payment, closing costs (except points), homeowners’ insurance, mortgage principal, mortgage insurance premiums, or extra principal payments.

Why Most Homeowners Get No Benefit

Thanks to the TCJA, the standard deduction has nearly doubled. Today it stands at:

• $15,750 for single filers in 2025
• $31,500 for married couples filing jointly
• $23,625 for heads of household

What if You Did Not Work This Year?

You can deduct mortgage interest even if you did not earn wages. The IRS only cares whether:

1.    You paid the interest during the tax year
2.    Your mortgage qualifies under IRS rules
3.    You itemize your deductions

But if you have no taxable income, the deduction will not reduce your tax bill because there is nothing to offset. You cannot carry the deduction forward either. So, you can claim it, but it might not provide a financial benefit.