Mortgage Tax Benefits Calculator

One of the advantages of real estate investment is that some homeowners may qualify to deduct mortgage interest payments from their income when filing their taxes. This calculator estimates your tax savings after a house purchase. Financial analysis is provided for the first year & subsequent years.

Input Information
Property Information
Home Value : ($)
Years Before Sell : (Yrs)
Loan Information
Amount : ($)
Interest Rate : (%)
Length : (Yrs)
Points : (%)
Closing Costs : ($)
Taxes And Insurance Information
Annual Taxes :
Annual Insurance :
Annual PMI :
Your Tax Rates And Deductions
Tax Rate : (%)
State Tax Rate : (%)
Deductions : ($)
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Save Each Year After Filing Taxes

Owning a home can be expensive. In addition to paying down your principle, you have to pay thousands in dollars in loan interest every year and thousands in property taxes, homeowner’s insurance, private mortgage insurance and perhaps homeowner’s association fees. That’s not even taking into account any repairs or improvements you might need to make from year to year, such as putting on a new roof or buying a new air conditioner.

One of the financial benefits of home ownership is that you can deduct the interest you pay on your loan, which can provide some financial relief when it seems like your home is only costing you money.

What Can You Deduct?

What you can deduct depends on your particular financial circumstances. However, in general, you can deduct any mortgage interest that you pay (up to $1 million), any interest you pay on a home equity loan (up to $100,000), any points you had to pay to get your mortgage or to pre-pay interest, and any property taxes you pay.

Mortgage Interest Income Tax Deduction.

Tax deductions are not the same as credits. At the end of the year, you deduct the interest from your taxable income, reducing your overall tax burden. Therefore, if your taxable income is $50,000 and you paid $5,000 in mortgage interest, your taxable income would be reduced to $45,000. Your taxes will then be calculated based on the appropriate percentage of your income for your tax bracket.

In contrast, a tax credit would deduct $5,000 from the amount of taxes you owe or would give you $5,000 if you owed no taxes.

Other Potential Deductions

If you work from home for any part of the time, you can also deduct your mortgage expenses from your taxes. The deduction has complicated rules, but essentially, you must deduct the proportion of your mortgage that is equal to the proportion of the space you use for your work. Therefore, if 1/5 of your home is dedicated to an office space, you can deduct 1/5 the cost of your mortgage from your taxes.

You can also deduct other expenses in the same proportion, including your utility charges, such as your electricity, water and Internet.

Because this deduction has many complex rules, it is important that you work with a certified tax professional to determine exactly what it is permissible for you to claim. Working with a tax professional is also advisable when you are making other mortgage deductions, such as your interest or property taxes. An accountant can help you ensure that you are taking the full deduction for which you qualify so that you can maximize your tax benefits.

Calculating Benefits

Though a tax professional can give you a precise picture of what you can expect to save with your mortgage deductions, you can also use the mortgage tax benefit calculator provided here to learn what benefits you may expect to receive at the end of the year. The calculator can give you an idea of your expected tax savings for each individual year and for the total time you plan to stay in your home. Just plug in the amount of the loan, your current home value, the interest rate, the length of the loan, any points or closing costs, and your annual taxes, insurance and PMI. Then plug in your state and federal tax rate and your standard deductions. We’ll e-mail you a complete financial analysis of what you can save in the coming years based on the interest you pay.


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