The deduction for mortgage interest is one of the most popular U.S. tax breaks. In fact, tax benefits like these are often a primary reason Americans decide to buy a home. Fortunately for many homeowners, the mortgage interest deduction survived the tax reform efforts, but it did receive two major modifications.
First, the cap (or limit) on the total deduction allowed has been reduced to the interest on up to $750,000 of qualified residence debt, or mortgage principal on a primary or secondary home. This is down from the previous limit of $1 million, although mortgages obtained before December 15, 2017 are grandfathered in to the higher limit.
Second, the previous additional limit that allowed taxpayers to deduct interest on as much as $100,000 of home equity debt has been eliminated. To be clear, interest on a home equity loan (such as a HELOC) may still be used as a deduction, but if and only if the loan was used to substantially improve your home. In this case, it becomes qualified residence debt and is counted as part of your $750,000 cap.