Mortgage Tax Calculator - Estimate Mortgage Interest Deduction Savings
Mortgage Tax Calculator
Payment Summary
Detailed Amortization Schedule
| Month | Starting Balance | Payment | Tax Savings | Principal | Interest | Ending Balance | Cumulative Principal | Cumulative Interest | Cumulative Payments |
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| Year | Starting Balance | Payment | Tax Savings | Principal | Interest | Ending Balance | Cumulative Principal | Cumulative Interest | Cumulative Payments |
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Balance Visual Charts
What Is This Calculator Used for?
This calculator helps you understand how much of your mortgage cost may be offset by taxes. It estimates the value of mortgage‑interest tax benefits across the life of the loan and summarizes the impact year by year so you can compare scenarios (rate, term, points, and fees).
* Taxpayers can deduct mortgage interest on qualified residential loans up to a maximum loan amount of $750,000. Interest on loans exceeding this amount is not deductible.
What Formulas Does This Calculator Use?
This tool uses a simplified combined marginal tax rate:
CombinedTaxRate = FederalRate + StateRate × (1 − FederalRate)
When Mortgage Amount ≤ $750,000
First Month Tax Savings = (First Month Interest + Paid For Points) * CombinedTaxRate Other Month Tax Savings = Other Month Interest * CombinedTaxRate
When Mortgage Amount > $750,000
First Month Tax Savings = ($750,000 * Annual Interest Rate ÷ 12 + Paid For Points) * CombinedTaxRate
For the following months:
First, determine if the current month's principal balance is greater than $750,000.
If yes, then the tax savings for that month equal:
$750,000 × (Annual Interest Rate ÷ 12) × CombinedTaxRate
If the principal balance is less than or equal to $750,000, then the tax savings equal:
Monthly Interest × CombinedTaxRate
How Much Your Mortgage Payments Could Reduce Your Income Taxes?
Let’s say you:
- Loan Amount: $400,000
- Annual Interest Rate: 6.5%
- Loan Term: 30 years
- Federal Tax Rate: 24 %
- State Tax Rate: 8%
- Origination Fee: 1%
- Points Paid: 1
- Other Fees: $1,000
The total interest paid in the first year was $25,868.36. You also paid $4,000.00 for one discount point. Based on a combined state and federal tax rate of 30.08%, your tax savings in the first year amount to $8,984.40. Over the 30-year loan term, you will save an average of $5,155.49 in taxes per year, for a total tax savings of $154,664.73.
References
- IRS — Home Mortgage Interest Deduction (Publication 936): https://www.irs.gov/publications/p936
- IRS — Topic No. 505, Tax Withholding and Estimated Tax (general guidance on marginal rates): https://www.irs.gov/taxtopics/tc505
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