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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 this calculator to determine how much
you could save in income taxes. Click on the "View Report"
button to the the results in detail.
Mortgage amount
Original or expected balance for your mortgage. Taxpayers
can deduct the interest paid on first and second 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.
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 your itemized decuctions 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.
Term in years
The number of years over which you will repay this loan.
The most common mortgage terms are 15 years and 30 years.
Monthly payment
Monthly principal and interest payment (PI).
Federal tax rate:
The marginal federal tax rate you expect to pay.
State tax rate:
The marginal state tax rate you expect to pay.
Annual Percentage Rate (APR)
A standard calculation used by lenders. It is designed to
help borrowers compare different loan options. For example,
a loan with a lower stated interest rate may be a bad value
if its fees are too high. Likewise, a loan with a higher stated
rate with very low fees could be an exceptional value. APR
calculations incorporate these fees into a single rate. You
can then compare loans with different fees, rates or different
terms.
APR after taxes
Annual percentage rate after taxes are taken into account.
Unlike your after-tax interest rate the APR after taxes takes
closing costs into account.
Loan origination percent
The percent of your loan charged as a loan origination fee.
For example, a 1% fee on a $120,000 loan would cost $1,200.
Discount points
Total number of "points" purchased to reduce your mortgage's
interest rate. Each "point" costs 1% of you loan amount. As
long as the points paid are not a brokers commission, they
are considered tax deductible in the year that they were paid.
Other fees
Any other fees that should be included in the APR calculation.
These fees can vary by lender, but at a minimum usually includes
prepaid interest.
Information and interactive calculators
are made available to you as self-help tools for your independent
use. We cannot and do not guarantee their accuracy or their
applicability to your circumstances. We encourage you to
seek personalized advice from qualified professionals regarding
all personal finance issues.
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