Mortgage Tax Deduction Calculator

Mortgage Tax Deduction Calculator

There’s usually not much to get excited about when it comes to tax season, except for your awaited returns and the deductions you can subtract from what you owe the federal government. 

For homeowners, mortgage interest tax deductions are a tax season silver lining. From primary mortgages to home equity-based loans, mortgage tax deductions are available under a variety of mortgage loan types. You can determine your mortgage tax deductions as they relate to the interest you have paid building, purchasing, or improving your home against your taxable income.

The Home Loan Expert is here to guide homeowners to calculate the mortgage interest deductions they are eligible to receive. We will walk you through what a mortgage tax deduction is, the financial information required to calculate your deduction, and mortgage interest deduction limits. 

Why is There a Mortgage Tax Deduction?

From monthly payments to home maintenance and ownership fees, the list of quickly-accumulated expenses can deter you from wanting to buy your dream home. Mortgage interest tax deductions were instated as an incentive to get borrowers to buy homes. They do this by allowing you to subtract certain expenses you incur throughout the tax year from your taxable income. It is appealing to homeowners who want to better position themselves financially by lowering the amount of money they have to pay in taxes.

How do I Calculate My Mortgage Tax Credit?

Before calculating your mortgage interest tax deduction, you will want to ensure you meet the following criteria: 

  • You filed an IRS form 1040 and itemized your deductions
  • The mortgage is a secured debt on a qualified home that you own

Then, you will need to do some research for the entry fields below to calculate your estimated mortgage interest tax deduction.

  • Mortgage Amount. This is the total amount you took out for your mortgage loan. 
  • Loan Term in Years. Most home loans are issued at 15 or 30-year term intervals. 
  • Annual Interest Rate. Your annual interest will depend on if the rate is fixed or variable. Fixed interest rates remain unchanged throughout the life of your loan. Variable interest rates reset periodically in alignment with market changes, which can cause your interest rate to increase or decrease. 
  • Federal Tax Rate. This is the marginal federal tax rate you expect to pay depending on your taxable income. 
  • State Tax Rate. This is the marginal state tax rate you expect to pay.
  • Monthly Payment. Enter your scheduled monthly payments for this input. It can include principal, interest, and other fees that are rolled into your overall mortgage payment.
  • Interest Rate After Taxes. This is the annual effective interest rate after taxes are taken into account. It is affected by mortgage debt limits.

The Rules for mortgage interest deductions changed in 2017 when The Tax Cuts and Jobs Act (TCJA) was passed. You will need to choose between a standard tax deduction or an itemized list of qualifying home improvement projects that fall under a mortgage tax deduction. Compare the figures to see which option will be more financially advantageous according to your personal situation. 

Under 2021’s standard tax deduction, single tax-payers qualify for a $12,500 deduction while married couples filing joint taxes qualify for a $25,100 deduction. Note that itemized deductions are categorized as using your mortgage loan to buy, build, or significantly improve your home. You may also be able to deduct interest on a home equity loan or line of credit (HELOC), as long as the loan was used for one of those three purposes.

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. Keep in mind if you make a higher income that allows for your itemized deductions to be phased out, your total tax savings may be less.

Are There Mortgage Interest Tax Deduction Limits? 

Calculating your mortgage interest tax deduction limit can help you decide if a standardized or itemized tax deduction is the right decision for you financially. The TCJA stipulates that there is a limit on how much you can deduct. As outlined by IRS regulations, single-file taxpayers and married couples filing joint taxes can deduct home mortgage interest on the first $750,000, or, $375,000 if you’re married but filing separately. 

For homeowners who incurred indebtedness before Dec. 16, 2017, the maximum mortgage interest tax deduction is set at $1 million for single-file taxpayers and married couples filing joint taxes. The amount is reduced to $500,000 if you’re married but filing separately. Deductions are also limited if you took out a mortgage for reasons other than to buy, build, or improve your home.

How Can The Home Loan Expert Help?

Part of The Home Loan Expert’s commitment to getting home buyers the best deal possible on their loan also means making them aware of tax deductions they can take advantage of to position themselves better financially. A mortgage interest tax calculator is a great place to start when estimating how much you might be able to deduct from your federal and state taxes this year. Speaking with one of our knowledgeable lending Experts can clarify what qualifies as a mortgage tax deduction. 

Our team of friendly lending Experts is selected from the same communities we serve. This makes us familiar with our clients’ needs and able to relate to what you are going through as homeowners. We understand that when it comes to savings, every little bit helps!

So give us a call today at 800-991-6494 to speak with one of our savvy lending Experts, who can help you determine how much you can save this tax season with mortgage tax deductions. We can also be reached through our application to find out if a mortgage tax deduction is the most financially strategic option for your personal finances today. 


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