Mortgage Interest and PMI Deductions in 2026: What H-1B and Green Card Holders Can Claim

Quick answer (updated October 2026): The mortgage interest deduction for H-1B holders works the same as for citizens once you are a US resident alien for tax purposes, usually by passing the substantial presence test. For 2026 you can itemize interest on up to $750,000 of acquisition debt, property taxes within the $40,400 SALT cap, and, if your income is low enough, PMI premiums.

Your colleague on Team Blind says "H-1B people can't deduct mortgage interest." Your cousin in Edison says he deducts everything. Both are half right, and the difference is a tax status most people never look up: resident alien versus nonresident alien.

This guide explains who qualifies, what changed for 2026 (a higher SALT cap and the return of the PMI deduction), and runs real numbers so you can see whether itemizing beats the standard deduction for your household. Use it to have a sharper conversation with your CPA, not to replace one.

Step one: are you a resident alien for tax purposes?

Your visa type does not decide your tax status. The IRS uses two tests, explained in Publication 519:

• Green card test. If you are a lawful permanent resident at any time in the year, you are a resident alien for tax purposes.

• Substantial presence test. You are present at least 31 days this year, and the total of all days this year, plus one-third of last year's days, plus one-sixth of the year before, reaches 183 days.

Most H-1B, L-1 and O-1 workers pass the substantial presence test in their first full calendar year in the US. Days as an F-1 student are generally "exempt" for up to five calendar years, so a recent OPT-to-H-1B switcher may still be a nonresident alien for part of their first H-1B year.

Your situation	Typical tax status	Can itemize mortgage interest?
Green card holder	Resident alien	Yes, same as a citizen
H-1B/L-1, second full year in US	Resident alien (substantial presence)	Yes
First year in US, arrived mid-year	Often dual-status	Limited; special rules, talk to a CPA
F-1/OPT within exempt-student years	Usually nonresident alien	Generally no for a personal residence
Moved back to India mid-year	Often dual-status	Partial; CPA needed

Nonresident aliens file Form 1040-NR and can claim only a short list of itemized deductions. Home mortgage interest on a personal residence is generally not on that list. That is where the "H-1B can't deduct" myth comes from. It describes nonresident aliens, not visa holders as a group. Our guide to non-permanent resident vs. non-resident alien status for mortgages explains why lenders and the IRS use these words differently.

Resident alien itemizing: what you can deduct in 2026

Once you are a resident alien, you itemize on Schedule A like anyone else. For tax year 2026:

• Mortgage interest on up to $750,000 of acquisition debt ($375,000 if married filing separately) for loans taken after December 15, 2017.

• State and local taxes (SALT), including property tax, up to $40,400 ($20,200 MFS). The cap phases down for modified AGI above $505,000, with a $10,000 floor.

• Mortgage insurance premiums (PMI), reinstated for 2026. The deduction phases out above $100,000 of AGI and disappears above $109,000 (half those amounts for MFS).

• Points paid on a purchase can often be deducted, subject to IRS conditions.

Itemizing only helps if the total beats your standard deduction: $16,100 single or $32,200 married filing jointly for 2026.

Worked examples: does itemizing actually help?

All examples are hypothetical illustrations. Interest is year-one interest on a 30-year fixed loan at 7.40%, the Freddie Mac weekly average, Oct 15, 2026 — illustration only, not a quote or offer. Tax savings use an assumed marginal bracket; yours will differ.

Household	Loan	Year-1 interest	Property/SALT	Itemized total	vs. standard deduction	Extra deduction	Est. savings
Single H-1B in Plano, TX	$320,000	$23,579	$7,000	$30,579	$16,100	$14,479	~$3,475 at 24%
H-1B couple in Frisco, TX	$600,000	$44,211	$13,000	$57,211	$32,200	$25,011	~$6,003 at 24%
Green card couple in San Jose, CA	$900,000	$55,264 (on $750k share)	$40,400 (capped)	$95,664	$32,200	$63,464	~$20,308 at 32%

A few things jump out:

• Texas buyers can still benefit, even without state income tax, because year-one interest on a sizable loan easily exceeds the standard deduction.

• The $750,000 limit bites in California. On a $900,000 loan, only interest on $750,000 counts, so about 83% of the interest is deductible.

• SALT cap math matters for high earners. The San Jose example assumes household MAGI under $505,000. Above that, the cap shrinks toward $10,000 and the benefit drops. If you are weighing a move, our Bay Area to Texas mortgage payment comparison shows how the whole payment picture shifts.

Remember that interest falls every year as you pay down principal, so the deduction shrinks over time. A shorter term front-loads less interest, which is one more input in the 15-year vs. 30-year mortgage decision.

Talk to a loan officer who's seen this before: We'll run your purchase at today's pricing and show year-one interest, PMI and escrowed taxes so your CPA has real numbers to work with. Book a call.

The PMI deduction in 2026: who actually gets it

The mortgage insurance premium deduction is back for tax year 2026, but the income limit is low. It starts phasing out at $100,000 of AGI and is gone above $109,000.

For most two-income tech households, that means no PMI deduction. Where it can help:

• A single buyer, or a single-income household with an H-4 spouse not working, earning under $100,000.

• A green card holder early in their career buying with 5–10% down.

• A household whose AGI is reduced by large pre-tax 401(k) contributions. AGI, not gross salary, is what counts.

Even when it is deductible, PMI is still a cost. Getting rid of it through equity or a new appraisal usually saves more than the deduction. See how to remove PMI on a conventional loan.

SALT cap 2026 for homeowners: married couples and mixed-status spouses

A few edge cases come up often in our community:

• Married filing separately halves both the mortgage interest cap ($375,000) and the SALT cap ($20,200). Couples sometimes file separately for student loan or other reasons; run both ways.

• A nonresident alien spouse. If one spouse is still a nonresident, the couple may be able to elect to be treated as residents for the year and file jointly. This has trade-offs, including reporting worldwide income. A CPA who handles cross-border returns should make that call.

• Indian home loans. Whether interest on a home in India is deductible on your US return depends on specific rules about qualified residences and total debt. Ask your CPA rather than assuming either way.

• Leaving the US mid-year. Dual-status rules generally limit deductions in the year you move. If that is on the horizon, plan with your CPA before December.

None of this affects your mortgage approval directly.

What the rules actually say

• IRS Publication 519 (US Tax Guide for Aliens): green card and substantial presence tests determine resident alien status; nonresident aliens may claim only limited itemized deductions.

• IRS Publication 936 (2026 draft) and 2026 Schedule A draft: mortgage interest on up to $750,000 acquisition debt ($375,000 MFS); mortgage insurance premium deduction reinstated for 2026, phasing out between $100,000 and $109,000 AGI.

• 2026 SALT cap: $40,400 ($20,200 MFS), phasing down above $505,000 MAGI to a $10,000 floor. As of October 2026.

• IRS 2026 inflation adjustments: standard deduction $16,100 single, $32,200 married filing jointly.

Frequently Asked Questions

Q: Can H-1B holders claim the mortgage interest deduction?
A: Yes, if you are a resident alien for tax purposes, which most H-1B workers become by passing the substantial presence test. You then itemize on Schedule A like a citizen. If you are still a nonresident alien, for example in exempt F-1 years, mortgage interest on your home is generally not deductible.

Q: Is PMI tax deductible in 2026?
A: Yes, the mortgage insurance premium deduction is reinstated for tax year 2026, but it phases out above $100,000 of AGI and disappears above $109,000 ($50,000 to $54,500 if married filing separately). Most dual-income tech households earn too much to claim it.

Q: What is the SALT cap for 2026?
A: For 2026, the SALT cap is $40,400, or $20,200 if married filing separately. It phases down for modified AGI above $505,000 but not below $10,000. Property taxes on your home count toward this cap along with state income or sales taxes.

Q: Do I need to itemize to get the mortgage interest deduction?
A: Yes. Mortgage interest is only deductible if you itemize, and itemizing only helps when your total deductions exceed the 2026 standard deduction of $16,100 single or $32,200 married filing jointly. Many buyers with sizable loans clear that bar in year one.

Q: Does the mortgage interest deduction affect how much I can borrow?
A: No. Lenders qualify you on gross income, debts and the full monthly payment. Tax savings are not counted as income. The deduction improves your cash flow after closing, so factor it into your budget but not into your pre-approval amount.

Get your year-one interest and payment numbers in 15 minutes

Tell us the price range, down payment and city you're targeting. We'll send a rate-and-payment scenario run at today's pricing that breaks out year-one interest, PMI (if any) and escrowed property taxes, ready to hand to your CPA. We work with H-1B, L-1 and green card buyers every week and shop 150+ wholesale lenders, so one lender's overlay isn't the final answer. Book a free 15-minute call at /contact, start your application at /apply, or call 713-366-4668.

Masala Loans is a brand of Matador Lending, LLC (NMLS #2072896). Written by Apurva Sanghavi, President, NMLS #227127. Equal Housing Opportunity. This article is general education, not tax, legal or immigration advice — consult a qualified CPA, attorney or immigration lawyer for your situation. Program availability, rates and terms vary by lender and borrower and are subject to change; not a commitment to lend.