Mortgage Tax Deduction Calculator
Estimate your tax savings from the mortgage interest deduction based on your loan details and marginal tax rate.
Results
Visualization
How It Works
The mortgage interest deduction allows homeowners who itemize their federal tax returns to deduct interest paid on up to $750,000 of mortgage debt. However, since the 2017 Tax Cuts and Jobs Act nearly doubled the standard deduction, fewer homeowners benefit from itemizing. Your actual tax savings depend on whether your total itemized deductions exceed the standard deduction.
The Formula
Total Itemized = Mortgage Interest + min(Property Tax, $10,000 SALT cap)
Extra Deduction = max(0, Total Itemized - Standard Deduction)
Tax Savings = Extra Deduction x Marginal Tax Rate
Variables
- $750,000 — Maximum mortgage debt eligible for interest deduction (for loans originating after Dec 15, 2017)
- $10,000 SALT — Cap on state and local tax deductions including property tax (per the Tax Cuts and Jobs Act)
- Standard Deduction — $14,600 for single filers, $29,200 for married filing jointly in 2025
- Marginal Tax Rate — Your highest federal income tax bracket, which determines the value of each dollar of deduction
Worked Example
A married couple with a $300,000 mortgage at 6.5% pays $19,500 in annual interest. With $4,200 in property taxes (capped at $10,000 SALT), their total itemized deductions are $23,700. Since the married standard deduction is $29,200, they would actually take the standard deduction and get no specific benefit from the mortgage interest deduction.
Practical Tips
- Only itemize if your total deductions exceed the standard deduction. Otherwise the mortgage interest deduction provides no additional tax benefit.
- The deduction is most valuable in the early years of the mortgage when interest payments are highest.
- State income taxes count toward the $10,000 SALT cap along with property taxes, which reduces the benefit for homeowners in high-tax states.
- Mortgage points (prepaid interest) paid at closing are also deductible in the year paid if you itemize.
- If you are close to the itemization threshold, consider bunching deductible expenses like charitable contributions into alternating years.
Frequently Asked Questions
Is the mortgage interest deduction going away?
The mortgage interest deduction remains in the tax code, but the Tax Cuts and Jobs Act of 2017 reduced the cap from $1 million to $750,000 and increased the standard deduction, making itemizing less common. These provisions are set to expire after 2025 unless Congress extends them.
What if my mortgage is over $750,000?
You can only deduct interest on the first $750,000 of mortgage debt. For example, on an $800,000 mortgage at 6.5%, your annual interest is $52,000 but only $48,750 (750K/800K x $52,000) is deductible. Mortgages taken out before December 15, 2017 have the old $1 million cap.
Can I deduct interest on a second home?
Yes, mortgage interest on a second home qualifies for the deduction, but the $750,000 cap applies to the combined debt of both properties. You cannot deduct interest on more than two properties, and investment properties use different rules (Schedule E deduction).
Do most homeowners actually benefit from the mortgage interest deduction?
After the 2017 tax reform, only about 10-15% of taxpayers itemize their deductions, down from about 30%. The benefit is concentrated among higher-income homeowners with large mortgages in high-tax states. Most homeowners with mortgages under $400,000 find the standard deduction is larger than their itemized deductions.
How does the SALT cap affect my mortgage deduction?
The $10,000 SALT cap limits the combined deduction for state income taxes and property taxes. In high-tax states, homeowners may already hit the SALT cap with income taxes alone, meaning property taxes provide no additional deduction benefit, which makes itemizing less advantageous even with significant mortgage interest.
Sources
- IRS Publication 936: Home Mortgage Interest Deduction
- Tax Foundation: Mortgage Interest Deduction Analysis
- Congressional Budget Office: Distribution of Tax Expenditures