Mortgage Tax Savings - Calculate Your Own Savings

It's tax time again and we can use a little help in determining any tax savings. Did you know that interest paid on a mortgage is tax deductible if you itemize on your on tax return. So are points that are paid to lower your interest rate. Use my mortgage calculator to determine how much you could save in income taxes.

In addition to using the mortgage calculator you might want to familiarize yourself with some common tax related definitions.

Federal tax rate:

The marginal federal tax rate you expect to pay.

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. For 2002 the standard deductions were $7,850 for married couples filing jointly, $3,925 for married couples filing separately, $4,700 for singles, and $6,900 for heads of household. You should also be aware that the total tax savings may be less for higher incomes that have their allowable itemized deductions phased out.

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. Home equity loans are limited to $100,000 or the amount of equity you have in your home. Our calculator limits your interest deduction to the interest payment that would be paid on a $1,000,000 mortgage.

State tax rate:

The marginal state tax rate you expect to pay.

Click here for more tax related definitions.