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Mortgage Tax Savings Calculator

Interest paid on a mortgage is tax deductible if you itemize on your tax return. So are points that are paid to lower your interest rate. Use this calculator to determine how much you could save in income taxes. Click on the 'View Report' button to view the results in detail.

Definitions

Mortgage amount

Original or expected balance for your mortgage. Taxpayers can deduct the interest paid on first and second mortgages up to $1,000,000 in mortgage debt (the limit is $500,000 if married and filing separately). Any interest paid on first or second mortgages over this amount is not tax deductible. Our calculator limits your interest deduction to the interest payment that would be paid on a $1,000,000 mortgage. Home equity debt interest deductibility is limited to the smaller of $100,000 or the total market value of your home minus outstanding debt. For home equity loans, please keep your loan amount below this amount or you may overstate your tax savings.

Interest rate

Annual interest rate for this mortgage.

Interest rate after taxes

Annual effective interest rate, after taxes are taken into account. Please note that in addition to the $1,000,000 mortgage debt limit; this calculator assumes that your itemized deductions will exceed the standard deduction for your income tax filing status. If your itemized deductions don't exceed your standard deduction, the benefit of deducting the interest on your home will be reduced or eliminated. The standard deduction for married couples filing a joint return is $12,400 for 2014. The standard deduction for single individuals and married couples filing separate returns is $6,200 for 2014. The standard deduction for heads of household is $9,100 for 2014. You should also be aware that the total tax savings may be less for higher incomes that have their allowable itemized deductions phased out.

Term in years

The number of years over which you will repay this loan. The most common mortgage terms are 15 years and 30 years.

Monthly payment

Monthly principal and interest payment (PI).

Federal tax rate:

The marginal Federal tax rate you expect to pay. You can use the table below to assist you in estimating your Federal tax rate.

Filing Status and Income Tax Rates 2015*
Tax Rate Married Filing Jointly or Qualified Widow(er) Single Head of Household Married Filing Separately
10% $0 - $18,450 $0 - $9,225 $0 - $13,150 $0 - $9,225
15% $18,450 - $74,900 $9,225 - $37,450 $13,150 - $50,200 $9,225 - $37,450
25% $74,900 - $151,200 $37,450 - $90,750 $50,200 - $129,600 $37,450 - $75,600
28% $151,200 - $230,450 $90,750 - $189,300 $129,600 - $209,850 $75,600 - $115,225
33% $230,450 - $411,500 $189,300 - $411,500 $209,850 - $411,500 $115,225 - $205,750
35% $411,500 - $464,850 $411,500- $413,200 $411,500 - $439,000 $205,750 - $232,425
39.6% over $464,850 over $413,200 over $439,000 over $232,425
*Caution: Do not use these tax rate schedules to figure 2014 taxes. Use only to figure 2015 estimates. Source: 2014 Rev. Proc. 2014-61

State tax rate:

The marginal state tax rate you expect to pay.

Loan origination percent

The percent of your loan charged as a loan origination fee. For example, a 1% fee on a $120,000 loan would cost $1,200.

Discount points

Total number of "points" purchased to reduce your mortgage's interest rate. Each "point" costs 1% of your loan amount. As long as the points paid are not a broker's commission, they are considered tax deductible in the year that they were paid.

Other fees

Any other fees that should be included in the APR calculation. These fees can vary by lender, but at a minimum usually includes prepaid interest.

Annual Percentage Rate (APR)

A standard calculation used by lenders. It is designed to help borrowers compare different loan options. For example, a loan with a lower stated interest rate may be a bad value if its fees are too high. Likewise, a loan with a higher stated rate with very low fees could be an exceptional value. APR calculations incorporate these fees into a single rate. You can then compare loans with different fees, rates or different terms.

APR after taxes

Annual percentage rate after taxes are taken into account. Unlike your after-tax interest rate, the APR after taxes takes closing costs into account.

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