Permanent $750,000 Acquisition Debt Limit Enacted for 2026 Onward Under OBBBA

Thousands of new homeowners across the United States 🇺🇸, including many recent immigrants building roots, will face familiar but still complex rules on home mortgage interest this filing season, with one notable change set to shape planning for years ahead. As of September 3, 2025, the federal rules for deducting interest on acquisition indebtedness — loans used to buy, build, or improve a qualified home — continue to follow post-2017 limits. A new law keeps the lower limit in place beyond 2025 and adds a future break for some borrowers paying private mortgage insurance.

The immediate takeaway for taxpayers who itemize: interest on a qualified mortgage remains deductible within set dollar caps, and the long-standing protection for families who refinance without increasing their balance still applies.

Key caps and how they apply

• For loans taken out after December 15, 2017:
  • Deductible interest cap: $750,000 (or $375,000 if married filing separately).
• For loans taken out on or before December 15, 2017:
  • Deductible interest cap: $1,000,000 (or $500,000 if married filing separately).
• Legislative update (per VisaVerge.com): the One Big Beautiful Bill Act (OBBBA) makes the $750,000 cap permanent starting in tax year 2026.
• Borrowers with pre-December 15, 2017 debt keep the $1,000,000 cap for that older loan balance — including after refinancing — so long as the new loan does not exceed the old principal.

Who can claim the deduction — basic filing requirements

To claim the home mortgage interest deduction:
1. File either Form 1040 or Form 1040-SR.
2. Itemize deductions on Schedule A (many households won’t if the standard deduction is larger).

Important administrative notes:
– If you pay at least $600 in mortgage interest during the year, your lender should send you Form 1098.
– Keep closing documents and loan statements to show how funds were used if the IRS asks.

Acquisition indebtedness: definition and practical examples

• Acquisition indebtedness = mortgage used to buy, build, or improve a qualified home (main home or second home).
• Interest is not deductible if the loan funds are used for general expenses (tuition, travel, unrelated debt).
• Home equity loans:
  • Deductible if proceeds are used to improve the home securing the loan (e.g., kitchen remodel, new roof).
  • Not deductible if used for other personal expenses.
• Practical advice: keep invoices, contractor agreements, and proof of payment to demonstrate that borrowed funds improved the home.

Refinancing rules and protections

• If you refinance a qualifying pre-December 15, 2017 mortgage, you keep the $1,000,000 cap so long as the new loan principal does not exceed the old balance.
• If you increase principal beyond the old balance:
  • The excess is judged under the $750,000 cap for post-2017 acquisition indebtedness.
  • If the cash-out portion was used for non-qualified purposes, it may not qualify at all.
• Recordkeeping tip: maintain a ledger showing exactly how cash-out funds were used.

Points (loan origination fees) — timing of deductions

Key rules for deducting points:
– Generally, points are amortized over the life of the loan.
– Exception (you may deduct the full amount in the year paid) when:
– Points are paid to buy, build, or improve your main home.
– Paying points is a standard practice in your area.
– Points aren’t more than the typical amount locally.
– You use the cash method of accounting.
– Points aren’t just renamed closing costs.
– Points aren’t financed into the mortgage.
– Points are computed as a percentage of the principal and shown as “points” on the settlement statement.

Examples:
– Paying $5,000 in points on a 15-year mortgage for a primary home: full deduction in year paid (if rules met).
– Paying points on a refinance or a second home: generally amortize over the term of the loan.

Private mortgage insurance (PMI) and future change

• The deduction for mortgage insurance premiums is not available for 2025.
• OBBBA includes a provision treating certain PMI tied to acquisition indebtedness as deductible mortgage interest starting in 2026.
• This could help first-time buyers who put down less than 20% and carry PMI for several years, including many immigrant households building credit histories.

Investment borrowing vs. home mortgage interest

• Loans for investment property or margin loans produce investment interest, not home mortgage interest.
• Investment interest deduction is limited to net investment income; unused amounts can be carried forward.
• To claim investment interest deduction, generally file Form 4952 unless you meet an exception.
• Avoid mixing home and investment borrowing to reduce audit risk.

Special considerations for immigrants and new arrivals

• Rules do not change with immigration status — what matters is whether you have a qualified mortgage and you itemize.
• Common recordkeeping challenges:
  • Form 1098 may include interest allocated between seller and buyer at closing — only claim what you actually paid.
  • If you moved midyear and sold a home, you can deduct interest through the day before the sale.
  • If a former main home becomes a rental, report interest as rental expense, not as an itemized mortgage interest deduction.
• Local clinics and nonprofit tax-help centers can assist with language or form translation and line-by-line guidance on Schedule A.

Forms and IRS resources

• The IRS’s Publication 936 is the baseline reference: Publication 936 (Home Mortgage Interest Deduction).
• Helpful IRS pages:
  • About Form 1040
  • Schedule A Instructions
  • About Form 1098
  • About Form 4952

Quick checklist before you file

1. Confirm the loan is acquisition indebtedness secured by your main or second home.
2. Check your loan start date to know which cap applies ($750,000 post-12/15/2017; $1,000,000 on or before that date).
3. If refinanced, compare the new principal to the prior balance and document any cash-out amount and its use.
4. Gather Form 1098, closing disclosure, and settlement statement.
5. Review whether points are deductible now or must be amortized.
6. Decide whether itemizing on Schedule A beats taking the standard deduction.
7. If you have investment interest, prepare Form 4952 if required.

Practical planning notes and warnings

• The OBBBA’s permanence of the $750,000 cap for new loans (starting 2026) means households should not expect a return to a $1,000,000 cap for future borrowing.
• PMI may become deductible in 2026, offering relief to low-down-payment borrowers starting that year.
• Keep borrowing “clean”: one loan for home purposes, separate loans for other uses to avoid mixing categories.
• Common filing mistakes:
  • Claiming interest for loans that didn’t improve the home.
  • Deducting points that were actually fees.
  • Assuming refinance points are deductible in full in the year paid when they must be amortized.

“A bit of care now prevents amended returns later.”
Small documentation steps — clear use of funds, correct application of caps, consistent reporting between Form 1098 and Schedule A — go a long way.

Broader policy context

• The Tax Cuts and Jobs Act (2017) lowered the acquisition indebtedness cap from $1,000,000 to $750,000 for new loans and nearly doubled the standard deduction, reducing itemizers.
• Economists note the deduction tends to benefit higher-income taxpayers more because they have larger mortgages and are more likely to itemize.
• The OBBBA maintains the post-2017 structure while raising the SALT cap to $40,000 (starting in 2025), which may bring some middle- and upper-middle-income families back into itemizing territory, particularly in high-cost states.

Final thoughts

For many buyers — especially immigrant families establishing credit and savings — having a clear, stable rulebook helps with long-term planning. The central rules are now settled:
– What counts as acquisition indebtedness,
– How refinancing affects the cap,
– When points are deductible.

With the OBBBA’s changes after 2025, taxpayers can plan knowing the $750,000 limit remains for new loans starting in 2026 and PMI may become deductible that same year. In tight budgets and steady-rate environments, this clarity matters. With good records, the deduction can operate as intended: recognizing the real cost of buying, building, or improving the place you call home.