3. Mortgage Interest Deduction Becomes Permanent

Mortgage interest remains one of the most valuable tax deductions for homeowners, particularly those with larger loans or higher interest rates.

What’s Staying the Same—and What’s New

Under Trump’s 2025 tax legislation:

• Homeowners who itemize deductions can continue deducting interest on up to $750,000 in mortgage debt
• The deduction applies to primary and secondary residences
• The cap is now permanent, rather than expiring after 2025

Without this change, the deduction limit would have reverted to $1 million, creating uncertainty for lenders and borrowers alike.

This permanence provides stability for homeowners evaluating whether to refinance their mortgage, purchase a second home, or invest in real estate.

Expanded Eligibility for Related Deductions

The new tax law also clarifies and expands what qualifies as deductible mortgage interest:

Private Mortgage Insurance (PMI): PMI premiums can be treated as mortgage interest, allowing eligible borrowers to deduct them. This benefit phases out for households with an adjusted gross income above $100,000.

Home Equity Lines of Credit (HELOCs): Interest paid on HELOCs remains deductible—but only if the funds are used to buy, build, or substantially improve a home. HELOC interest used for debt consolidation, medical expenses, or consumer spending is not deductible.

For homeowners managing debt strategically, this distinction is critical when choosing between a cash-out refinance, HELOC, or personal loan.