Mortgage Interest Tax Deduction Calculator
Calculate potential tax savings from mortgage interest deductions. Features amortization schedules, US tax bracket integration, and post-2017 debt limit logic.
About
Homeowners in the United States often utilize the mortgage interest deduction to reduce taxable income. This mechanism allows borrowers to deduct interest paid on the first $750,000 of mortgage debt (or $1,000,000 if originated before December 16, 2017). Accuracy in this calculation helps in determining whether itemizing deductions on IRS Schedule A yields a lower tax liability than the Standard Deduction.
The financial impact of this deduction depends heavily on the amortization curve. In the early years of a loan, the payment composition is primarily interest, maximizing potential tax savings. As the loan matures, the principal portion increases while the interest component decreases, reducing the tax benefit. This tool projects these shifts over the first five years to assist in long-term financial planning.
Understanding the interplay between your marginal tax bracket and eligible interest is critical. A taxpayer in the 37% bracket realizes significantly higher cash savings per dollar of interest paid compared to one in the 12% bracket. This calculator isolates the deductible portion of your payment and applies the specific debt limits mandated by current tax law.
Formulas
The core calculation determines the monthly interest payment based on the outstanding principal balance. The formula for the monthly mortgage payment is:
Where P is the principal, r is the monthly interest rate, and n is the total number of payments. The deductible interest component is then derived by applying the IRS debt limit ratio:
Finally, the actual cash value of the tax savings is the product of the deductible interest and your marginal tax rate:
Reference Data
| Loan Amount | Interest Rate | Annual Interest (Year 1) | Deductible Interest (Post-2017) | Tax Savings (24% Bracket) | Tax Savings (35% Bracket) |
|---|---|---|---|---|---|
| $300,000 | 6.0% | $17,900 | $17,900 | $4,296 | $6,265 |
| $400,000 | 6.0% | $23,800 | $23,800 | $5,712 | $8,330 |
| $500,000 | 6.5% | $32,300 | $32,300 | $7,752 | $11,305 |
| $600,000 | 6.5% | $38,800 | $38,800 | $9,312 | $13,580 |
| $700,000 | 7.0% | $48,700 | $48,700 | $11,688 | $17,045 |
| $750,000 | 7.0% | $52,200 | $52,200 | $12,528 | $18,270 |
| $800,000 | 7.0% | $55,700 | $52,200 (Capped) | $12,528 | $18,270 |
| $900,000 | 7.0% | $62,700 | $52,200 (Capped) | $12,528 | $18,270 |
| $1,000,000 | 7.5% | $74,600 | $56,000 (Capped) | $13,440 | $19,600 |
| $1,200,000 | 7.5% | $89,500 | $56,000 (Capped) | $13,440 | $19,600 |
| $1,500,000 | 8.0% | $119,300 | $59,700 (Capped) | $14,328 | $20,895 |