Question relating to mortgage interest limit.

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I purchased a second home in August 2026. My primary home was purchased in April 2023 and the outstanding balance is over $750,000.

My questions are - is it mandatory to claim interest paid (from a 1098) as a deduction? If I don’t claim interest paid, do I still have to include the mortgage on my second home in the limit calculation? If I don’t claim interest paid in 2025, am I allowed to start claiming interest paid in 2026 and beyond (since it will cover an entire year so the interest paid will be more significant)?

Here’s my dilemma. Since I bought the second home late in the year, my interest paid covers only a few months. Because I am over the $750k limit on my primary mortgage, adding another mortgage pushes me that much further over the limit (as it increases the denominator (total mortgage balance) and reduces the deductible percentage of interest.) Hope this makes sense and someone can advise. Thank you.

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AnnetteB6

Employee Tax Expert

No, you are not required to claim the mortgage interest on your second home if you choose to not include it, except in the case where your mortgage interest may be limited (as explained by user ncperson).

Typically, claiming more mortgage interest is a benefit to you which would reduce your taxes. But you can choose to not claim all of your itemized deductions. This is unlike income and ordinary and necessary business expenses where you are required to include them on the return regardless.

However, if your mortgage interest is being limited due to your total debt amount, then you are required to claim the interest on both mortgages so that your deduction is accurate.

[edited 3/21/2026 | 7:59 am PST]

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NCperson

Level 15

@bhart0308 - I think you are missing part of the math.... if you took out a 2nd mortgage late in the year, the denominator can be based on the 13 point average of the outstanding balances, i.e. take the balance for every month of the year. Appears you are just doing a simple two point average.

look at the 'statements provided by your lender" on the right side of page 15. Note it states to use zero in the months the mortgage wasn't outstanding.

if the interest rate is higher on the 2nd mortgage compared to the first, it'll be a better outcome for you to go through this exercise than just dismissing the 2nd mortgage interest statement. Once completing the math, use the worksheet on page 14 to determine the deduction.

in effect, this approach IS MANDATORY if the interest rate on the 2nd home is less than the interest rate on the first mortgage. That is because if you dismiss the 2nd mortgage interest statement and the interest rate is lower on the 2nd mortgage, you may be taking an interest rate deduction greater than the instructions permit.

If the interest rate is higher on the 2nd mortgage, the IRS is not going to care if you dismiss the interest because you are likely taking less of an interest deduction than you are entitied to.

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

@AnnetteB6 When the total mortgage debt is below the $750,000 limit, then I agree that there no requirement to deduct the interest. But when the mortgage debt exceeds $750,000, the use of the worksheet is necessary as described in Pub 936. The math changes and a taxpayer could otherwise take more of a deduction than permitted. That would occur if the taxpayer decided to dismiss the mortgage with the lower interest rate and only use the mortgage with the higher interest rate. The worksheet ineffect blends the interest rates of the two mortgages proportionately and dismissing the mortgage interest related to the mortgage with the lower interest rate upsets that concept.

Example: Primary Home mortgage: $800,000, 10% interest rate and $80,000 of interest. Second Home Mortgage: $200,000, 1% interest rate and $2,000 of interest.

If the Second Home Mortgage was dismissed, the deduction would be $75,000 (10% times the $750,000 limit).

If the worksheet were used, the deduction would be $82,000 of interest divided by the average $1,000,000 balance or $82,000 and then take 75% of that (to get to the average $750,000 limit yields a deduction of $61,500.

In this example, dismissing the Second Home Mortgage Interest would mean the deduction is $75,000. But when the instructions are followed, the deduction would only be $61,500. So the tax payer can not automatically pick and choose which mortgage to deduct if the average mortgage balance of all mortgages exceeds $750,000. Use of the worksheet for all qualified mortgages is necessary.