Maximum mortgage interest credit/deduction?

Question

I bought my first home at the beginning of 2023 and will have a tremendous amount of mortgage interest payment made by the end of the year, is there a maximum amount of mortgage interest I can deduct from my taxes?

Simplified scenario for example, if my federal taxes are 20k and my mortgage interest is 25k would I get a refund of all 20k federal taxes paid in 2023?

za.botsaxes · Accepted Answer

Hi Keithcdcl,

You can deduct up to $750,000 (if married filing jointly) and up to $375,000 if not.

However, tax DEDUCTION is not the same thing as a tax CREDIT. If you had 25k in tax CREDITS and owed 20k you would not need to pay any taxes.

$25,000 DEDUCTION is subtracted from your household income to calculate the new tax you owe.

Simplified example, you had to pay 20% on 100k of your earnings; 20% of 100k = 20k. With 25k of deductions you owe 20% on 75k (100k-25k); which is $15k.

https://www.irs.gov/pub/irs-pdf/p936.pdf

JMSSGV · Accepted Answer

"You can deduct up to $750,000 (if married filing jointly) and up to $375,000 if not."

You cannot DEDUCT up to $750,000. You can deduct the INTEREST on up to $750,000 of indebtedness. Big difference.