Did the 2025 tax law alter limits on mortgage interest or medical expense deductions for itemizers?
Executive summary
Congress’s 2025 tax overhaul made the lower $750,000 mortgage-acquisition indebtedness limit permanent (with $375,000 for separate filers), ending the scheduled reversion to a $1 million cap after 2025 (see [1], [2], [3]). Available sources show no change to the medical‑expense deduction’s structure: unreimbursed medical expenses remain deductible only to the extent they exceed 7.5% of adjusted gross income and only by taxpayers who itemize [4], [5].
1. What changed for mortgage interest — the new floor is fixed
The headline policy move in the 2025 law was to lock in the Tax Cuts and Jobs Act (TCJA) era $750,000 cap on acquisition indebtedness as a permanent ceiling for mortgage interest itemizers, rather than letting the TCJA’s scheduled expiration return the cap to $1 million after 2025; multiple sources report the new law makes the $750,000 limit permanent and the $375,000 separate‑filing threshold applies for married filing separately [1], [2], [3].
2. Why this matters to itemizers — fewer taxpayers and concentrated benefits
The TCJA’s lower cap plus a larger standard deduction reduced the share of filers who itemize; experts and policy analysts have warned that the MID’s remaining benefits are concentrated among higher‑income taxpayers with large mortgage balances [6], [7]. Making the $750,000 limit permanent preserves that narrower, more targeted subsidy rather than restoring broader pre‑2018 generosity [8], [9].
3. Secondary tweaks reported in coverage — PMI and mortgage insurance premiums
News outlets and tax firms report related technical adjustments: the new law restores or treats private mortgage insurance (PMI) premiums as deductible mortgage interest beginning in 2026 in some descriptions, and some practitioner summaries note mortgage insurance premiums are folded into the $750,000 cap [10], [11]. These are implementation details practitioners flag; readers should consult Form 1098 guidance and IRS notices when filing [12].
4. What did NOT change about medical‑expense deductions
Available reporting and IRS guidance show no statutory change in 2025 to the fundamental rule for medical expense deductions: taxpayers who itemize still may deduct only unreimbursed medical and dental expenses that exceed 7.5% of adjusted gross income, per IRS Topic 502 and Publication 502 [4], [5]. Coverage from policy outlets and tax help sites likewise repeats the 7.5% threshold as the operative rule for 2025 [13], [14].
5. Practical impact: who wins and who loses
Locking in the $750,000 cap keeps limits tighter for homebuyers with very large loans, particularly in high‑cost housing markets; those who expected an automatic return to a $1 million cap after 2025 will not see that relief [1], [8]. Conversely, taxpayers who rely on medical deductions face no statutory easing of the 7.5% AGI floor in the 2025 law—so the path to itemizing still requires medical (and other) deductions to exceed the standard deduction thresholds [4], [5].
6. Conflicting or caveated reporting to note
Some sources frame the TCJA limits as “temporary” and say they would revert after 2025 unless Congress acted [15], [8]; the 2025 law is the congressional action that prevented that reversion [1], [2]. Other analyses and think‑tank pieces discuss hypothetical reforms (e.g., much lower interest caps or repeals) as policy options, not enacted law [6], [3]. Tax preparer write‑ups and firm alerts add implementation details (PMI, mortgage insurance) that may be phased in or clarified by the IRS [10], [11].
7. What filers should do next
Taxpayers with large mortgages or mortgage insurance should review lender Form 1098 reporting and watch IRS guidance or professional advisories for PMI/mortgage‑insurance treatment; multiple preparer and firm guides recommend consulting a tax pro because of interplay with itemizing and the standard deduction [12], [10]. Taxpayers relying on medical deductions should keep meticulous records of out‑of‑pocket medical spending and remember only expenses above 7.5% of AGI count for itemizers [4], [5].
Limitations and sourcing note: this summary uses the available reporting and official IRS publications provided above; available sources do not mention any other statutory changes to the medical expense deduction formula beyond the 7.5% AGI threshold [4], [5].