What Is a Jumbo Loan?
In 2025, many people are buying large homes, especially in expensive cities. To pay for them, they often need big mortgages called jumbo loans. These loans are bigger than the usual loan size allowed by the government.
Right away, it’s important to know this: jumbo loan tax limits affect how much mortgage interest you can deduct on your taxes. If you borrow more than the set loan limit, you won’t be able to deduct all of your interest. This can lead to higher taxes.
In most places, the limit for a normal (or “conforming”) loan in 2025 is about $750,000. If your mortgage is more than that, it’s a jumbo loan—and the rules are different.
How Do Tax Deductions Work on Jumbo Loans?
Let’s look at how these deductions work. If you have a normal mortgage, you can deduct the interest on up to $750,000 of the loan if you’re married and filing together. If you file taxes alone, the cap is $375,000.
Jumbo loans are different. If you borrow $1.2 million in 2025, you can only deduct the interest on the first $750,000. You’ll pay interest on the rest, but the IRS won’t let you use it to lower your taxes.
This means that jumbo loan borrowers lose some tax savings. It’s a surprise to many buyers, but knowing about jumbo loan tax limits helps you plan better. If your loan started before December 15, 2017, different rules may apply—you might still use the old $1 million deduction cap. But for new jumbo loans in 2025, the lower limit matters.
How to Handle Jumbo Loan Tax Limits
There are smart ways to manage the extra costs from jumbo loan tax limits.
- Talk to a Tax Expert
Before you get a jumbo loan or refinance, speak with a tax advisor. They can explain how much interest you can deduct—and how much you can’t. - Put More Money Down
If your loan is close to the $750,000 line, try to put down a bigger payment. That might keep your loan within the limit, so you can deduct more interest. - Track Your Interest Payments
Keep good records of how much interest you pay each year. Even if part of it isn’t deductible, you still need the info when filing taxes.
Understanding jumbo loan tax limits in 2025 helps you avoid surprise tax bills and make smarter home buying choices.
Final Thoughts on Jumbo Loan Rules
Jumbo loans help people buy big homes, but they come with different tax rules. You won’t get the same deductions as smaller loans. That’s why it’s so important to learn about jumbo loan tax limits before you sign any papers.
With some planning, you can avoid costly mistakes and enjoy your new home, without a shock when tax season rolls around.
