* **Loan limit:** The federal tax code places a limit on the amount of mortgage debt eligible for the deduction. As of 2023, this limit stands at $750,000 for new loans. This means that only the interest paid on the first $750,000 of your mortgage debt can be deducted.
* **Incentive for Homeownership**: The deduction acts as an incentive for people to purchase homes, which can contribute to a stable housing market.
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<h2>Key Takeaways</h2>
<li><strong>Medical Expenses:</strong> This covers loans taken out to pay for medical bills, including treatment, surgery, or hospitalization.</li>
4. **Loan Purpose:** The loan cannot be used for other purposes, such as financing a business or other investments.
* **Phase-out**: The mortgage interest deduction is also subject to income-based phaseouts. This means that the deduction may be reduced or eliminated if your income exceeds certain thresholds.
### An Example: A California homeowner in the 22% tax bracket with a $500,000 mortgage and a 4% interest rate would pay $20,000 in interest annually. This deduction could help them save $4,400 in taxes ($20,000 x 22% = $4,400).