How to Maximize Mortgage Interest Deductions by Planning Around the $750,000 Cap on Acquisition Debt in 2025
Page 1: Understanding Mortgage Interest Deductions and the $750,000 Cap
Mortgage interest deductions help homeowners lower their taxes. When you buy a home and take out a mortgage, you can usually deduct the interest you pay on that loan from your taxes. But there’s a limit.
Since 2018, the IRS lets you deduct mortgage interest on only the first $750,000 of acquisition debt. Acquisition debt means money borrowed to buy, build, or improve your main or second home. This rule is important to understand if you want to maximize mortgage interest deductions by planning around the $750,000 cap on acquisition debt.
Here’s a simple example:
If your mortgage is $900,000, only the interest on the first $750,000 is deductible. The rest — the interest on the extra $150,000 — can’t be used to lower your tax bill.
This rule applies to homes bought after December 15, 2017. If you bought earlier, the old limit of $1 million might still apply, but that could change. That’s why planning is key — especially in 2025, when home prices and loan amounts are high.
Page 2: Smart Ways to Plan Around the $750,000 Cap
If your home loan is more than $750,000, don’t worry. There are still smart ways to maximize mortgage interest deductions by planning around the $750,000 cap on acquisition debt.
1. Make a Bigger Down Payment
If you haven’t bought a home yet, try to make a larger down payment. This will keep your mortgage under the $750,000 limit. For example, if your dream home costs $900,000, putting $150,000 down means your loan is only $750,000 — right at the cap.
2. Avoid Using a Mortgage for Renovations Later
If you plan to fix up your house, try to include that cost in your original mortgage. That way, it counts as part of your acquisition debt and might still be deductible. If you wait and get a second loan later, the interest may not be deductible at all.
3. Consider Home Equity Loans Carefully
Home equity loans and lines of credit (HELOCs) are not always deductible unless used to buy, build, or improve the home. Using one to pay off credit cards or buy a car won’t help your taxes. To maximize mortgage interest deductions by planning around the $750,000 cap on acquisition debt, only borrow for home-related costs.
Page 3: Special Cases and What to Watch For in 2025
1. Married Filing Separately
If you’re married and file taxes separately, each person can only deduct interest on $375,000 of mortgage debt. That’s half the cap. In this case, careful planning is even more important to maximize mortgage interest deductions by planning around the $750,000 cap on acquisition debt.
2. Refinancing
If you refinance your mortgage, the new loan must not be more than the original loan balance to stay deductible. Also, the new loan must be for the same house. The IRS won’t let you increase your loan and deduct interest on the extra money unless it’s for home improvements.
3. Watch the Tax Laws
Tax rules can change. The $750,000 cap is part of the Tax Cuts and Jobs Act and may expire in 2026 unless Congress extends it. This means 2025 is a good time to act and maximize mortgage interest deductions by planning around the $750,000 cap on acquisition debt while the rules are still in place.
Summary
To save money on your taxes in 2025, make smart choices about your mortgage. Know the rules. Keep your acquisition debt under $750,000 when possible. Plan your down payment and renovation costs. And stay updated on tax laws.
With good planning, you can maximize mortgage interest deductions by planning around the $750,000 cap on acquisition debt and keep more money in your pocket.
