Your mortgage interest might not lower your taxes if your total itemized deductions (mortgage interest + other deductible expenses) aren't higher than the standard deduction, the loan doesn't meet IRS rules (e.g., used for non-home improvements), or you're subject to the Alternative Minimum Tax (AMT), but the most common reason is just that the standard deduction offers a bigger tax break.
If the loan is not secured by a home that you own, the interest is not deductible. A mortgage loan is normally secured by the home that the loan was used to purchase. Answering this question incorrectly is probably the most common reason that mortgage interest is omitted from Schedule A.
Homeowners may refinance mortgage debts existing on 12/15/2017 up to $1 million and still deduct the interest, so long as the new loan does not exceed the amount of the mortgage being refinanced. The Act repealed the deduction for interest paid on home equity debt through 12/31/2025.
The Canada Revenue Agency isn't so generous, and as such, mortgage interest on a principal residence is generally not deductible as the Income Tax Act considers interest to be a capital expense.
Many business expenses are 100% deductible, including advertising, employee wages, rent, supplies, and certain business meals like company parties or meals for the public, while personal deductions like student loan interest or charitable donations (depending on the type) can also be fully deductible for individuals. The key is that the expense must be "ordinary and necessary" for your trade or business or meet specific IRS criteria, often differentiating from the 50% rule for client meals.
Although finance costs, predominantly loan interest, are now disallowed as an expense that can be utilised to reduce taxable rental income, these charges do qualify for a tax credit limited to 20% basic rate Income Tax.
Original or expected balance for your mortgage. Taxpayers can deduct the interest paid on qualified residences for up to $750,000 in total mortgage debt (the limit is $375,000 if married and filing separately). Any interest paid on first, second or home equity mortgages over this amount is not tax-deductible.
Mortgage interest deduction is permanent
Trump's 2025 tax cuts and spending legislation makes the mortgage interest deduction cap permanent. This deduction was set up to expire after 2025 under the TCJA, and revert to the previous $1 million cap.
Mortgage interest deduction limit is now permanent
However, there is a cap to the amount of interest you can deduct. The limit was set to expire at the end of 2025, but the OBBBA makes it permanent. The threshold will continue to be: $750,000 (for most filers)
Mortgage interest.
Homeowners may no longer deduct interest paid on home equity loans, which was allowed for loans up to $100,000 before the TCJA, unless the debt is used to buy, build, or substantially improve the taxpayer's home that secures the loan.
If the loan is not a secured debt on your home, it is considered a personal loan, and the interest you pay usually isn't deductible. Your home mortgage must be secured by your main home or a second home. You can't deduct interest on a mortgage for a third home, a fourth home, etc.
The mortgage interest deduction (MID) is worth it only if your total itemized deductions (including mortgage interest, property taxes, and charitable giving) exceed the much higher standard deduction, which is rare for many due to tax law changes. It reduces taxable income, saving money for those who itemize, especially those with large mortgages and high interest rates early in their loan, but it requires extra paperwork (Form 1098) and effort.
In most cases, you can deduct all of your home mortgage interest. How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds.
As of 2023, in Canada, you can deduct your mortgage interest if you use your property for investment income. This means renting it out and earning rental, business, or professional income for the entire year.
You can deduct mortgage interest on up to $750,000 of debt for your primary and one second home (or $375,000 if married filing separately) for loans taken out after December 15, 2017; older mortgages (before that date) have higher limits of $1 million ($500,000 if married filing separately). The interest must be on qualified residences, and you must itemize deductions; home equity loan interest is only deductible if used for home improvements.
The $20,000 limit under the measures applies on a per asset basis, so small businesses can instantly write off multiple assets. Assets valued at $20,000 or more can continue to be placed into the small business pool and depreciated at 15% in the first income year and 30% each income year after that.