The mortgage interest deduction allows homeowners to deduct interest paid on loans up to $750,000 from taxable income. You must itemize deductions on Schedule A.
With a $400,000 mortgage at 6.5%, you pay roughly $25,900 in first-year interest. In the 24% bracket, that's $6,216 in tax savings.
You can also deduct mortgage points, home equity loan interest (for improvements), and property taxes up to $10,000.