When mortgage deductions are insufficient to offset taxable income, individuals should first assess their eligibility for itemizing deductions. If itemizing yields a higher deduction than the standard deduction ($13,850 for single filers and $27,700 for married couples in 2023), they should adjust their tax strategy to claim mortgage interest, state and local taxes (SALT), and charitable contributions. If itemizing is not beneficial, they may increase taxable income through strategies like maximizing W-2 earnings or retirement contributions to reach the threshold where itemizing becomes advantageous. Refinancing to a lower interest rate or shorter loan term could also reduce deductible interest over time. Additionally, deducting property taxes (up to $10,000 annually) or combining mortgage interest with other deductible expenses may bridge the gap. If deductions remain insufficient, paying the resulting tax bill or seeking a tax professional’s guidance is recommended.

The IRS reports that only 10% of U.S. taxpayers itemized deductions in 2022, highlighting the importance of comparing itemized vs. standard deductions. The SALT cap ($10,000) limits deductions for high-tax states, necessitating strategic allocation of deductible expenses. For example, combining mortgage interest ($10,000 average annual deduction) with property taxes and charitable contributions can exceed the standard deduction. Refinancing at today’s average 6.5% rate (Federal Reserve, 2023) may reduce monthly payments and interest, indirectly lowering taxable interest. However, 60% of homeowners with mortgages do not itemize, underscoring the need for proactive tax planning. Data from the Tax Foundation shows that itemizers save an average of $12,000 annually, emphasizing the value of optimizing deductions. Ultimately, tailored strategies—such as adjusting filing status, leveraging tax credits, or consulting a CPA—can mitigate insufficient deductions and ensure compliance.