Can You Deduct Mortgage Interest On A Second Home? + FAQs

Yes, mortgage interest on a second home can be deductible under certain conditions.

According to a 2022 housing survey, roughly 6.5 million U.S. homes are second homes, yet many owners aren’t maximizing their tax benefits. In fact, a significant share of vacation homeowners are unsure about the rules. This comprehensive guide will clear up the confusion. In this article, you’ll discover:

🏠 IRS rules for deducting interest on a second home versus your primary residence (and why you can’t deduct more than two homes)
💡 Personal-use vs. rental-use differences – how using your second home as a vacation retreat or as an investment property changes your deduction
🌍 State-by-state differences in mortgage interest deductions (see which states limit or disallow second-home deductions in the handy table)
📖 Key tax concepts explained – acquisition indebtedness, home equity loans, IRS Publication 936, the Tax Cuts and Jobs Act, and other essentials you need to know
⚠️ Common pitfalls to avoid – real examples of taxpayers who got second-home interest deductions wrong (and what recent tax court rulings teach us)

Primary vs. Second Home: How Mortgage Interest Deductions Work

The good news is that the IRS does allow you to deduct mortgage interest on a second home, much like on your primary home. The deduction for home mortgage interest is a well-established tax benefit intended to promote homeownership. However, there are specific rules and limits to be aware of when you own two homes:

Only Two Homes Count: You can deduct interest for your main home and one other qualified home. In other words, at any given time the IRS lets you write off interest on up to two personal residences. If you’re fortunate enough to own three or more homes, interest on the third (or fourth, etc.) is generally not deductible as personal mortgage interest. (Exception: If additional properties are purely rental or business properties, their interest is deducted differently – more on that later.)

You Must Itemize Deductions: The mortgage interest deduction is an itemized deduction on Schedule A of your tax return. This means you only benefit if you forego the standard deduction. In the post-2018 tax landscape, the standard deduction is quite high (e.g. $27,700 for a married couple in 2023), so fewer people itemize now.
- Practical tip: Add up your potential itemized deductions (mortgage interest, property taxes, etc.) – if the total doesn’t exceed your standard deduction, you won’t actually get a tax break from your second home’s interest. Many middle-income taxpayers find they can’t itemize under current law, so this deduction primarily helps those with larger mortgages or higher itemizable expenses.

“Qualified Residence” Definition: For interest to be deductible, the property must be a qualified residence. The IRS defines this as your primary home and one other home that you choose to treat as your second home for the year. Importantly, a qualified home doesn’t have to be a traditional house – it can be a condo, co-op, mobile home, boat, or RV. As long as it has sleeping, cooking, and toilet facilities, it counts as a home. (Yes, your yacht or camper could potentially be your second “home” for tax purposes, and interest on a loan secured by it might be deductible!)

Loan Must Be Secured by the Home: To deduct the interest, the mortgage loan must be secured by the property itself. In plainer terms, your home must be collateral for the loan. If you took out a personal loan or used a credit card to buy the second property (without the home as security), that interest is not treated as mortgage interest. But virtually all standard home mortgages, HELOCs, and home equity loans are secured debt, so this is usually only an issue in unusual financing situations.

Now, what about the dollar limits? The tax law doesn’t let you deduct unlimited interest – it caps the mortgage size that qualifies. Under current federal rules, you can deduct interest on up to $750,000 of combined mortgage debt used to buy or improve your first and second home ($375,000 if married filing separately). This limit came from the Tax Cuts and Jobs Act (TCJA) of 2017. It applies to mortgages originated after December 15, 2017. If you have older mortgages from before that date, they’re “grandfathered” under the previous higher limits (up to $1 million of home acquisition debt, plus an additional $100,000 of home equity debt).

Example: Suppose your primary home has a $500,000 mortgage and you also have a $400,000 loan on a beach cottage. If both loans were taken out post-2017, that’s $900,000 of total mortgage debt – which exceeds the $750,000 limit. In this scenario, not all your interest is deductible. You’d only be able to deduct interest on the first $750,000 of that debt. Essentially, about five-sixths of your total interest could be written off, and the rest is considered personal interest (nondeductible). Conversely, if your combined mortgages are below $750,000 (say $300k on one home and $300k on another), 100% of your interest is generally deductible (again, assuming you itemize).

It’s worth noting that these limits could change after 2025. The TCJA’s $750k cap is scheduled to expire at the end of 2025, potentially reverting the limit back to $1,000,000 of mortgage debt (indexed to inflation) for 2026 and beyond. Congress may act before then, but keep an eye on future tax law changes if you’re planning long-term.

Primary vs. Second – Any Other Differences? For the most part, interest on a second home follows the same IRS rules as interest on a primary residence. There is no requirement that the second home be less expensive or smaller or anything like that – a mortgage on a luxury vacation home can be deducted just as well as interest on a modest first home, subject to the debt cap.

One small difference: if you paid points (prepaid interest) to get a mortgage on the second home, you generally cannot deduct the full points in the year paid. Points on a primary home purchase are often fully deductible upfront, but points paid on a loan for a second home (or a refinance of any home) must be deducted over the life of the loan. This means if you paid $5,000 in points for a 30-year loan on a second home, you’d typically deduct around $167 per year for 30 years, rather than all at once. It’s a subtle point (pun intended!), but one to remember when calculating your deductions.

Finally, keep in mind that property taxes on your second home are also deductible as an itemized deduction – but they fall under the separate $10,000 SALT cap (which limits the combined deduction for state and local taxes, including property taxes, to $10k per year). Many second-home owners hit that $10k cap just with their primary home’s property and state income taxes, meaning additional property tax from a second home might not be deductible in practice. This doesn’t directly affect your mortgage interest deduction, but it’s an important tax consideration of owning multiple homes.

If You Rent Out Your Second Home, Can You Still Deduct the Interest?

What if your second home isn’t just sitting idle for the months you’re not there? Many people rent out their vacation homes part of the time to help cover costs. The IRS draws a sharp line between a second home used for personal purposes and a rental property. Mortgage interest is deductible in both cases, but the how and where you deduct it differs greatly depending on your usage.

Personal Residence vs. Rental Property – The Key Difference: A “qualified second home” for the mortgage interest deduction must be used by you (or your family) for personal purposes during the year. If you treat the place purely as a rental investment and never use it yourself, it’s not considered a second home for itemized deduction purposes. Instead, it’s an income-producing property. In that case, you cannot deduct the interest on Schedule A as a personal itemized deduction. But don’t worry – you still get to deduct the interest, just on a different part of your tax return (Schedule E for rental income/expenses, as a business expense).

So either way, interest paid on a rental property loan is generally tax-deductible – it’s just that interest on a pure rental is written off against rental income, not as a personal deduction. This distinction matters because rental deductions aren’t subject to the $750k mortgage cap or the itemizing requirement (they’re taken above-the-line on Schedule E). However, rental deductions are subject to complex passive loss and vacation home rules to prevent abuse.

Mixed Use (Personal + Rental): What about the many owners who both use and rent out their second home? The IRS has allocation rules for this scenario. If you rent out the home more than 14 days in the year, and also use it personally more than the greater of 14 days or 10% of the rental days, the home is considered a personal residence and a rental.

You essentially split everything between personal use and rental use based on time. For example, if you use your lake cabin 30 days and rent it out 60 days, that’s 90 days total usage, with 1/3 personal and 2/3 rental. In this case, you could deduct 1/3 of the mortgage interest (and 1/3 of other expenses like utilities) on Schedule A as a personal itemized deduction (subject to the mortgage debt limits), and the other 2/3 on Schedule E against rental income.

There are a couple of special rules to note:

The 14-Day Rule: If you rent the home out for 14 or fewer days in the entire year, the IRS basically ignores the rental activity. You don’t have to report the rental income at all (it’s tax-free), and the home is treated as 100% personal use. All the mortgage interest can be deducted on Schedule A (again, assuming you itemize). Many vacation-home owners deliberately keep their rental days under this limit to get the best of both worlds – some extra income and full deduction of interest as a second home.

The 10% Rule: If you rent the home a lot and your personal use is minimal, there’s a point where the home switches to being classified as a rental property for tax purposes. Specifically, if your personal use days are not more than 14 days and not more than 10% of the days rented, then the property is considered a rental, not a personal second home.
- In that scenario, none of the mortgage interest is deductible on Schedule A – it all belongs on the rental expense schedule. For instance, if you stay in the home just 10 days a year and rent it out 200 days, your personal use (10 days) is only 5% of the rental days – that fails the 10% test, so the house is viewed as purely a rental property that year.

The takeaway: Yes, you can still deduct mortgage interest on a second home you rent out, but only if you also use the home enough personally to qualify it as a second residence. If you barely use it yourself, you’ll still get the interest deduction, but it will be as a business expense on the rental side, not a personal itemized deduction. And if you do both, be prepared to divide the interest between personal and rental use. Proper record-keeping of rental days vs. personal days each year is crucial to substantiate your deduction split if needed.

One more note: If you do fall into the mixed-use category, there are ordering rules for expense deductions on a Schedule E vacation home (often called the vacation home loss limitations). In short, you can’t deduct rental expenses in excess of rental income when you have significant personal use; the mortgage interest and property taxes allocated to rental use are usually deductible in full, but other expenses can be limited. This goes beyond our focus on interest, but be aware that heavily personal-use vacation rentals can’t be used to generate a tax loss in most cases – they can only break even at best.

What Mortgage Interest Can You Deduct? (Qualifying Loans and Limits)

Not all interest is created equal in the tax code. The law draws a line between “acquisition indebtedness” and “home equity indebtedness”, and this distinction will determine if your interest is deductible.

Acquisition Indebtedness: This is the debt you incur to buy, build, or substantially improve a qualified home (primary or second). If you take out a mortgage to purchase the second home, or a construction loan to build a vacation cabin, or a loan to add an extra bedroom or a new roof – those are all acquisition debts. Interest on acquisition debt is deductible, with the caveat of the overall loan limit ($750k or grandfathered $1M). Refinanced loans generally count as acquisition debt too (up to the amount of the original mortgage principal you had before refinancing). The key is the loan proceeds must be used for the home itself.

Home Equity Debt: This traditionally referred to loans secured by your home that are used for other purposes – for example, you borrow against your home’s equity to pay off credit cards, to buy a car, or to fund a child’s college tuition. Prior to 2018, interest on up to $100,000 of such home equity debt was deductible regardless of use.
- The Tax Cuts and Jobs Act eliminated this deduction for 2018-2025. Now, if you take a home equity loan or HELOC on either your main or second home and do not use the money for home improvements, the interest is not deductible. However, if you use a home equity loan to renovate your second home (say, building a new deck or upgrading the kitchen), then that loan is effectively considered acquisition debt (because it “substantially improves” the home).
- In that case, the interest would be deductible (again subject to the overall debt cap). Always trace how you use borrowed funds – it can make the difference between deductible and nondeductible interest.

To qualify for the deduction, the loan must also be secured by the home. If you have an unsecured loan you used to improve the property, unfortunately that interest isn’t deductible as mortgage interest (even though the use of funds was for home improvement, the loan itself isn’t a mortgage in the eyes of the IRS without the home as collateral).

Loan Limits in Practice: As discussed earlier, for most taxpayers now the magic number is $750,000 in total acquisition debt on up to two homes. It doesn’t matter how you split it – it could be $750k on one and $0 on the other, or $375k on each, etc. If you are married filing separately, each spouse is limited to $375k of their own debt. If you co-own a second home with someone you’re not married to, interestingly, each of you can potentially deduct interest on up to $750k of debt each (because the limit applies per taxpayer, not per property, in the case of unmarried co-owners).

This quirk was confirmed in a notable tax court case, Voss v. Commissioner (2015), which ruled that two unmarried taxpayers who jointly owned expensive homes could each take the maximum deduction, effectively doubling what a married couple would be allowed on the same property. The IRS now follows that court decision. While most people don’t co-own homes with non-spouses, it’s an interesting nuance for high-net-worth friends or relatives who jointly purchase a vacation property.

What about interest on a third home? As mentioned, the tax law only lets you designate one primary and one secondary residence for the mortgage interest write-off. If you have a third home that’s purely personal use (not rented), the interest on that loan is considered personal interest – not deductible. Some savvy taxpayers convert additional homes into either full-time rentals or even consider an arrangement where a third home might qualify temporarily if another home is not used that year, but basically you can’t get around the two-home rule for personal deductions.

You can, however, choose which home to count as your second home in any given tax year if you have more than one extra property. For instance, if you own a lake house and a mountain cabin, you could choose whichever yields the larger interest deduction (or whichever you used personally more) to be your “second home” this year, and perhaps switch in a later year if circumstances change. You just can’t deduct both in the same year.

Recap of Qualifying Interest Requirements: To ensure the mortgage interest on your second home qualifies for a deduction, make sure all of these are true:

The home is a qualified residence (your main home or one other personal home you use, including a boat/RV with living facilities).

You are legally liable for the debt (you signed the note and/or are an owner). If you just help a friend or relative by making their mortgage payments, you generally cannot deduct that interest – only the person who is obligated on the loan or the property owner can. (There are rare exceptions where equitable ownership is recognized, but don’t count on it without solid documentation.)

The loan is secured by the home (mortgage, home equity loan, HELOC, or similar).

The loan was used to buy, build, or improve the home. (If not, then it’s not acquisition debt and the interest won’t qualify under current rules.)

Your total mortgage debt on both homes is within the allowed limit. (Interest on the portion of loans beyond $750k post-2017 won’t be deductible.)

If all the above check out, you’re generally in good shape to deduct the interest. Always keep records like your Form 1098 (which the lender sends you, showing how much interest you paid) and documentation of how loan funds were used (especially for HELOCs).

The IRS doesn’t usually ask for proof of what you did with a cash-out refinance or equity loan, but if you are ever audited, you may need to show that your second home loan was indeed used for that home’s remodel and not to buy a sports car.

Do All States Allow Second Home Mortgage Interest Deductions?

When you’re calculating your tax savings, don’t forget about state income taxes. The rules we’ve discussed so far are for federal taxes (IRS rules). States often follow the federal framework for itemized deductions, but there can be important differences when it comes to mortgage interest on second homes. Some states offer the same deduction, others limit it, and a few don’t allow it at all.

Below is a quick state-by-state glance at differences in deducting second home mortgage interest on your state return:

State	Deductibility of Second Home Mortgage Interest
California	Yes – Follows old federal limits: interest on up to $1,000,000 of mortgage debt (plus up to $100k home equity) is deductible. More generous than current federal $750k cap.
New York	Yes – Generally follows federal rules (allows second home interest up to the federal $750k limit). However, state income tax is high, and SALT cap doesn’t apply on the state return for state/local tax deduction.
Texas / Florida	N/A – No state income tax, so no state itemized deductions needed. (Your mortgage interest benefits you only on your federal return.)
Massachusetts	No – Does not allow deduction for mortgage interest on personal residences at the state level. (MA has no general itemized deductions; only very limited specific deductions.)
New Jersey	No – No itemized deductions in NJ. Mortgage interest can’t be deducted on NJ state return (though property tax up to $15k can be partially deducted or credited).
Wisconsin	Yes, with a catch – Allows mortgage interest deduction, but only for properties located in Wisconsin. If your second home is out-of-state (say a Florida condo for a WI resident), Wisconsin disallows that interest on the state return.
North Carolina	Yes, but limited – NC caps the combined mortgage interest + property taxes deduction at $20,000 per year. This limit can pinch high-value second-home owners even if federal allows more.
Oklahoma	Yes, but limited – OK caps the deduction for mortgage interest + property taxes at $17,000 annually. Similar to NC, this can restrict deductions on larger or multiple homes.
Oregon	Yes (for now) – Follows federal rules currently. There have been legislative proposals in Oregon to eliminate the mortgage interest deduction for second homes to raise revenue (citing it as a luxury benefit), but as of this writing such a law hasn’t passed.

Why do these differences matter? If you live in a state like California, you may get a bigger mortgage interest write-off on your state taxes than on your federal return (thanks to that $1 million cap vs $750k federally). In states like Massachusetts or New Jersey, you might get no state tax break for owning a second home – meaning your cost of ownership is effectively higher when you count state taxes.

And quirks like Wisconsin’s rule could sway decisions on where to buy a vacation property (Wisconsin residents might lean toward in-state lake houses to keep the tax benefit). Always check your own state’s tax rules or consult a state tax expert, because state laws can change and often have unique twists.

Common Mistakes to Avoid When Deducting Second Home Interest

Claiming the mortgage interest deduction for a second home can be straightforward if you follow the rules, but there are several common pitfalls that can trip up taxpayers. Here are some mistakes to watch out for (and how to avoid them):

Assuming All Second Homes Qualify: Not every second property automatically qualifies as a “second home” for tax purposes. Mistake: Deducting interest on a third vacation property or on a second home you never personally use.
- Solution: Remember you can only have one designated second home for the deduction, and you must use it personally enough (or not rent it too much) for it to count. If you have multiple extra properties, choose one to classify as your personal second home (and consider renting or other uses for the others where the interest can be deducted in other ways).

Not Itemizing Deductions: Some homeowners pay thousands in second-home mortgage interest and then mistakenly take the standard deduction, losing any benefit. Mistake: Forgetting that you must itemize to deduct mortgage interest.
- Solution: In the year you buy a second home (or incur substantial interest), check if your total itemized deductions (interest, taxes, charitable, etc.) exceed the standard deduction. If not, you won’t actually realize any tax savings from that interest. This often catches new second-home owners by surprise, especially after 2018 when the standard deduction increased.
- Plan for this: sometimes bunching deductions (like prepaying property taxes or making large charitable donations in the same year as your home purchase) can tip you over the standard deduction threshold so you can benefit.

Exceeding the Debt Limit and Deducting Everything: The bank doesn’t tell you if your interest is fully deductible – they just report what you paid. It’s up to you to know the tax law limits. Mistake: Deducting 100% of your interest when your total mortgages exceed the allowed $750k/$1M limit. Solution: Calculate the portion of interest that’s deductible. If your combined mortgage balances are above the limit, you must prorate the interest.
- For example, if you have $900k of applicable debt and the limit is $750k, you can only deduct 750/900 (83.3%) of the interest paid. The IRS Form 936 worksheet (from IRS Publication 936) can guide you through this calculation. Don’t just rely on the Form 1098 total – do the math so you don’t over-claim and risk an IRS adjustment.

Misclassifying Rental Use: This is a big one for vacation home owners. Mistake: Trying to deduct all the interest on Schedule A even though you rented out the home most of the year, or conversely, claiming all the interest on Schedule E while also using the home significantly yourself. Solution: Know the 14-day/10% rules. If your personal use was below the threshold, treat it as a rental property (no personal interest deduction, but all interest goes on Schedule E).
- If your personal use was above the threshold and you also rented it, allocate correctly between personal and rental use. A common error is not prorating expenses – you must split mortgage interest (and other costs) based on days of personal vs. rental use. Failing to do so can either shortchange your deduction or overstate it (which the IRS could flag if they examine the ratio of your reported rental days to expenses).

Deducting Interest You’re Not Entitled To: This can happen in unusual ownership situations. For instance, maybe your spouse or child owns the second home, but you’re the one paying the mortgage. Or you co-signed a loan for someone else’s home. Mistake: Deducting interest when your name isn’t on the deed or loan, and you’re not the beneficial owner. The IRS generally says you can only deduct interest if you are legally liable for the debt and have an ownership interest in the property. There have been tax court cases where someone tried to deduct mortgage interest paid on a home titled in someone else’s name – and it was denied because they couldn’t prove equitable ownership.
- Solution: Ensure you are an owner or co-owner of any property for which you plan to deduct interest, and that the mortgage is in your name (or jointly). If you’re just helping out a family member by making payments, talk to a tax advisor; there are scenarios (like under a legal agreement or trust) where you might be considered the equitable owner, but you’d need solid documentation.

Ignoring the Points Amortization Rule: As noted earlier, if you paid points on your second home’s mortgage, you cannot deduct them all at once (unless it was a loan on your primary home and met certain criteria). Mistake: Deducting a large mortgage points payment in the year of purchase for a second home.
- Solution: Amortize those points over the life of the loan. It’s an easy detail to miss, especially if you’re used to the rule that points on a primary home purchase can be fully deducted. The IRS expects you to spread out points on second homes and on refinances. Make a note of the total points and keep track of the portion you can deduct each year.

Forgetting the State Tax Angle: Some people meticulously handle the federal deduction but then assume it’s the same for their state taxes (or forget differences). Mistake: Deducting second-home interest on a state return where it’s not allowed or subject to a cap.
- Solution: Double-check your state’s treatment (refer to the table above!). For example, if you moved from California to Massachusetts, you might be shocked that your mortgage interest no longer saves you anything on state taxes. Avoid an unpleasant surprise or an unintended state non-compliance by knowing the state rules.

In short, attention to detail is key. The mortgage interest deduction, especially with two homes, has a lot of moving parts – but each pitfall can be avoided by understanding the rules. When in doubt, consult IRS Pub. 936 (which includes examples and worksheets), or get advice from a tax professional, particularly if you have a complicated situation (like mixed personal/rental use or co-ownership arrangements).

Tax Court Rulings: Second Home Interest Deductions on Trial

To truly understand how the rules play out, it helps to look at some real-world cases. Over the years, the IRS and taxpayers have occasionally clashed over second home deductions, and a few key tax court rulings shed light on gray areas. Here are a few illustrative examples and what we learn from them:

Co-Owners and the Debt Limit – Voss v. Commissioner (2015): This landmark case involved an unmarried couple who jointly owned two expensive homes in California. Together, their mortgages exceeded the $1.1 million old debt limit (at the time, pre-TCJA rules allowed $1M acquisition + $100k equity). They each claimed the maximum deduction, effectively doubling the benefit since they weren’t married (each filed their own tax return).
- The IRS tried to limit them to one combined $1.1M cap, but the Ninth Circuit Court sided with the taxpayers. It ruled that the mortgage interest limits apply on a per-taxpayer basis for unmarried individuals. In plain English, two unmarried co-owners could deduct interest on up to $1.1M each (so $2.2M total) under prior law.
- Under current law, this would translate to $750k each. Lesson: If you co-own a second home with someone you’re not married to, you might each get the full mortgage cap. This is a favorable outcome for those in such arrangements (though if you’re married, you’re stuck sharing one cap jointly – you can’t file separately to double-dip).

Must Be an Owner – Tracey, TC Summary Opinion: In one Tax Court summary opinion, a wife attempted to deduct mortgage interest on a second home that was legally owned by her husband. She was not on the title or the mortgage note, and she could not prove that she had any ownership interest in the property (for example, she wasn’t on the deed and they hadn’t treated the property as jointly owned in any legal sense). The court disallowed her deduction entirely, even for payments she personally made, because she wasn’t an owner and wasn’t liable on the debt.
- Lesson: You can’t deduct interest just because you paid it – you need to be an owner/borrower. Make sure the ownership and loan documents reflect anyone intending to claim the deduction.

Interest on Unused Loan Proceeds – Pauwels, TC Memo 1997: In this older case (under prior law), a taxpayer took out a large mortgage secured by his home, but part of the money was invested elsewhere, not in the home. The IRS disallowed the portion of interest related to the funds not used for the residence, and the court upheld that. This foreshadowed the stricter rules now under TCJA.
- Lesson: If you pull cash out of your second home’s equity and use it for unrelated purposes, that interest isn’t deductible as home mortgage interest (unless it falls under old pre-2018 limits). Be mindful how you use refinance or HELOC money.

Vacation Home Rentals and Allocation – Bolton v. Commissioner (1979): This is a classic case that established the allocation method for vacation homes with mixed use. The taxpayers had a vacation property they rented and used personally. The IRS said they had to allocate expenses (including interest) between rental and personal use based on days, which the court agreed with. (The exact allocation method – IRS favored total days vs. taxpayer argued rental days only in denominator – was debated, but Congress later clarified using total days.)
- Lesson: The courts have long supported the idea that you must split mortgage interest when a second home is both rented and personal. This validates the 14-day/10% framework we discussed. Always allocate correctly; the IRS can tell from your reported rental days if you likely did the split or not.

Boat as a Second Home – Tucker v. Commissioner (2011): In a more unusual scenario, a taxpayer deducted interest on a loan for a houseboat that he used as a second home. The IRS challenged whether a boat qualified as a home. The court looked at the fact that the boat had sleeping quarters, a galley (kitchen), and a head (toilet) – satisfying the definition of a dwelling unit. The interest was allowed.
- Lesson: Non-traditional homes can qualify as second homes for the mortgage interest deduction. If you finance an RV, boat, or similar property that you live in part of the year, you likely can treat it as your second home (just ensure it meets the requirements and the loan is secured by the asset).

These examples underscore the importance of following the rules. When taxpayers push beyond the permitted limits or ignore technical requirements, the IRS (and the courts) tend to enforce the law strictly. On the flip side, where the law has gray areas, courts sometimes interpret them favorably for taxpayers (as with the co-owner debt limit case).

Staying informed on these rulings can help you avoid mistakes – or even plan more tax-efficiently (for instance, knowing that co-owning property with a non-spouse could allow a larger combined deduction in some cases).

Pros and Cons: Is the Second Home Mortgage Interest Deduction Worth It?

Owning a second home has obvious lifestyle appeal, but from a tax perspective, does the mortgage interest deduction make it a smart financial move? Like most tax matters, there are two sides to the coin. Here’s a summary of the benefits and drawbacks of the second home mortgage interest deduction:

Pros	Cons
Significant Tax Savings – The interest portion of a mortgage payment is often large in the early years of a loan. Deducting it can save you thousands on federal (and possibly state) taxes, effectively lowering the cost of owning a second home.	Must Itemize to Benefit – You only get these savings if you itemize deductions. Many homeowners won’t surpass the standard deduction, meaning the second home interest provides no extra tax benefit in practice.
Two Homes, One Limit – The tax code does allow interest on two homes, recognizing personal use of a vacation home. This offers flexibility: you can own a getaway and still deduct interest just like on your main home (within the combined limit).	Caps and Restrictions – The deduction is limited to interest on $750k of total mortgage debt for most new loans. High-end home buyers won’t get to deduct interest beyond that, reducing the incentive. Also, interest on any third home is completely nondeductible.
Rental Options – If you rent out the second home, mortgage interest is still deductible either way (as itemized deduction or against rental income). There’s some tax relief whether you use it personally or as an investment.	Complex Rules – The second home deduction comes with extra complications: personal use tests, allocation between rental and personal, record-keeping of usage, etc. It’s easy to make mistakes that could nullify the deduction. Compliance costs (or professional fees) can eat into the benefit.
Encourages Investment – For those who can afford it, the deduction softens the blow of carrying two mortgages. This tax break has historically encouraged vacation home purchases and even helped support real estate markets in second-home communities.	Benefit Skewed to Wealthy – Because of itemization and loan size, the people who reap the largest second-home interest deductions are typically higher-income individuals. If you’re in a lower tax bracket or your second home mortgage is small, the tax savings might be fairly modest.
Possible State Tax Breaks – In states like California or New York that allow the deduction, you get a break on state income tax too, amplifying the savings from your mortgage interest.	SALT Cap Limits Overall Benefit – With the $10k cap on state/local tax deductions, many second-home owners lose deductions on property taxes. This doesn’t directly cap mortgage interest, but it means your total itemized deductions might not increase as much as expected by a second home, especially in high-tax states.

In summary, the mortgage interest deduction on a second home can be a nice perk that eases the carrying costs of a vacation property or second residence. It’s not usually the primary reason to buy a second home, but it can certainly sweeten the deal. On the flip side, you shouldn’t overestimate this benefit – tax law changes in recent years have watered it down for many (with higher standard deductions and lower mortgage caps). Always run the numbers for your situation: sometimes the deduction might only save you a few hundred dollars a year, which shouldn’t be the tail that wags the dog on a major purchase decision. Think of it as a bonus, not a guarantee.

The Bottom Line: Maximizing Your Second Home Tax Benefits

To answer the question plainly: Yes, you can deduct mortgage interest on a second home – and it can lead to meaningful tax savings – but only if you meet the IRS’s conditions and plan accordingly. The landscape of deductible mortgage interest has grown more complex, with higher standard deductions, a lower debt cap, and strict personal-use tests for vacation homes.

High-level strategies for second-home owners include keeping loan balances within limits, ensuring you use the home enough personally (if you want to treat it as a second residence), and being mindful of how you allocate any rental use.

Always maintain good documentation (interest statements, usage logs, etc.), and consult resources like IRS Publication 936 for detailed guidance. If your scenario is unusual – say, co-owning a home, using an RV as a second home, or juggling multiple properties – getting advice from a tax professional can help optimize your deductions and keep you on the right side of the law. With the right approach, you can enjoy your second home and rest easy knowing you’re squeezing every legitimate tax benefit out of it. Happy travels and happy taxing!

Frequently Asked Questions

Can I deduct mortgage interest on a second home if I don’t itemize?
No. You must itemize deductions to claim any mortgage interest (first or second home). If you take the standard deduction, you cannot deduct mortgage interest at all on your return.

Is second home mortgage interest still deductible in 2025 under the new tax law?
Yes. The rules established by the Tax Cuts and Jobs Act (2017) still apply through 2025. You can deduct interest on up to $750,000 of combined qualified mortgage debt on two homes (assuming you itemize).

Can I deduct interest on a second home that I rent out most of the year?
Yes – but only the portion for when you use it personally. If you rent it out extensively and use it yourself only a little (not exceeding 14 days or 10% of rental days), the IRS treats it as a rental property. In that case, you’d deduct the mortgage interest as a rental expense on Schedule E, not on Schedule A.

Does a boat or RV count as a second home for the mortgage interest deduction?
Yes. A boat, RV, or similar property can qualify as a second home if it has sleeping, cooking, and toilet facilities. The loan must be secured by the boat/RV. Many taxpayers deduct interest on loans for houseboats, campers, or motorhomes that they use as vacation residences.

Can I deduct mortgage interest on two homes at once?
Yes. The tax law allows interest deductions on your primary residence and one second home simultaneously. You can claim both on Schedule A in the same year (within the combined loan limit). However, interest on a third home would not be deductible as personal mortgage interest.

Do I need to live in my second home for a certain time to deduct the interest?
Yes. To treat the property as a personal second home (for Schedule A deduction), you should use it yourself for more than 14 days or more than 10% of the days it’s rented out (whichever is greater). This ensures the home is classified as a residence rather than purely a rental. If you don’t meet that, the interest can still be deducted but only as a rental/business expense.

If I co-own a second home, how is the mortgage interest deduction split?
Each owner can only deduct the interest that they personally paid and only if they are liable on the debt. Typically, co-owners split the interest based on who pays what (or ownership percentage). Notably, if co-owners are unmarried, each can potentially deduct interest on up to $750k of debt each (per taxpayer limit), as long as each is paying that much interest and is on the hook for the loan.

Are property taxes on a second home deductible too?
Yes. Property taxes on a second home are deductible as an itemized deduction. But remember, all state and local taxes combined (property, income, sales taxes) are subject to the $10,000 SALT cap on Schedule A. So you may be paying property tax on the second home that effectively isn’t deductible if you’ve hit that cap with your other taxes.

Will the mortgage interest deduction limit go back up to $1 million after 2025?
Possibly. The current $750,000 debt limit is set to expire in 2025 along with many TCJA provisions. If Congress does nothing, in 2026 the limit would revert to the prior law (interest on up to $1,000,000 of acquisition debt, plus $100,000 of home equity debt, would be deductible). However, Congress could pass new tax legislation before then to change or extend the current rules. Keep an eye on any tax law updates around 2025.

What’s the best way to maximize my second home mortgage interest deduction?
Ensure your financing is optimized: keep total home debt within the deductible limits if you can (e.g., making a larger down payment to stay under $750k). If your second home is also a rental, try to use it personally beyond the minimum days so you can deduct some interest on Schedule A (if that benefits you more than solely on Schedule E).

And always itemize in years where your combined deductions (with the second home interest included) exceed the standard deduction. Timing matters too – for example, paying January’s mortgage payment in late December can give you an extra interest deduction in the current year if you need to bump up your itemized total. Finally, stay organized with records and consider professional advice for complex situations to ensure you’re not leaving any tax savings on the table.