Mortgage Interest Deduction Tax Savings Calculator

Enter Calculation

Mortgage Loan Balance ($)

Annual Interest Rate (%)

Annual Interest Paid ($) — optional override

Marginal Tax Rate (%)

Deductible Debt Cap ($) $750,000 (loans after Dec 15, 2017) $1,000,000 (loans before Dec 16, 2017)

Results

Estimated Annual Tax Savings

$6,240

from deducting mortgage interest

Annual interest paid	$26,000
Deductible interest (after cap)	$26,000
Monthly savings	$520
Effective rate reduction	24%

What This Calculator Does

This tool applies to United States federal income tax. It estimates how much you could save each year by claiming the home mortgage interest deduction. Under current rules (Tax Cuts and Jobs Act), interest is generally deductible on up to $750,000 of qualified acquisition debt for loans taken after December 15, 2017, or up to $1,000,000 for older loans. These savings only apply if you itemize deductions rather than take the standard deduction.

How to Use It

Enter your mortgage loan balance and annual interest rate, and the calculator estimates your yearly interest. You can override this with an exact annual interest figure (from Form 1098) if you have it. Choose your debt cap and enter your marginal tax rate (the bracket your top dollar of income falls in). The result shows your estimated annual and monthly tax savings.

The Formula Explained

First, deductible interest is computed by scaling total interest by the ratio of the debt cap to your loan balance: \(I_{ded} = I \times \frac{\min(B,\ C)}{B}\). If your balance is below the cap, all interest is deductible. Then savings equal deductible interest times your marginal rate: \(S = I_{ded} \times r\).

$$\text{Tax Savings} = I \cdot \frac{\min\left(B,\ C\right)}{B} \cdot \frac{\text{Marginal Rate \%}}{100}$$ $$\text{where}\quad \left\{ \begin{aligned} I &= \text{Loan Balance} \times \frac{\text{Rate \%}}{100} \\ B &= \text{Loan Balance} \\ C &= \text{Debt Cap} \end{aligned} \right.$$

How deductible interest is capped by the debt limit and then multiplied by your marginal rate.

Worked Example

Suppose you owe $400,000 at 6.5% with a 24% marginal rate. Annual interest \(\approx \$400{,}000 \times 0.065 = \$26{,}000\). Since $400,000 is below the $750,000 cap, all $26,000 is deductible. Tax savings = \(\$26{,}000 \times 0.24 = \$6{,}240\) per year, or about $520 per month.

$$\text{Tax Savings} = \$26{,}000 \times 0.24 = \$6{,}240$$

Only the interest on debt up to the cap is deductible.

FAQ

Does this only help if I itemize? Yes. The mortgage interest deduction is only valuable if your total itemized deductions exceed the standard deduction.

Why is interest capped? Interest on mortgage debt above the cap ($750k or $1M) is not deductible, so we proportionally reduce the deductible amount.

Is this exact tax advice? No. It is an estimate. State taxes, AMT, and other factors may change your actual benefit — consult a tax professional.