Mortgage Tax Savings Calculator

Generally, the interest portion of your monthly mortgage payment is tax deductible. Mortgage discount points, optional extras that you pay to reduce your mortgage rate when you set up a home loan, are also generally tax deductible. However, points paid to agencies or brokers are not deductible. You can consult your tax advisor to determine what your specific tax deductibility will be for your personal financial situation, but in the meantime use the calculator below, which will show you how much money you can save by deducting your interest payments from your taxable income.

Why use the Mortgage Tax Savings Calculator?

The mortgage tax savings calculator will calculate what your potential tax savings are based on the mortgage rate you will pay on your home loan and the number of points that you pay. It also takes into account the Federal and State tax rates that you pay. If you click Federal tax rate, a useful popup will appear, displaying a table of the current Federal tax rates depending on your income and circumstances.

The calculator is also useful as it enables you to take into account your closing costs, such as origination fee (the percentage of your loan which is paid to the lender up front alongside the deposit) and mortgage points. This in turn gives you a calculation of your potential APR, both before and after tax. Once all of your information is in the calculator, you can click “Calculate” to see a brief analysis of your first year tax savings, or click “View Report” for a detailed breakdown including your average savings over the term of the loan.

How to use the Mortgage Tax Savings Calculator

Confused? Here’s what you do:

  1. Enter the amount you intend to borrow by using the sliders or typing into the white box
  2. Choose your mortgage term from the drop-down menu
  3. Specify the interest rate you will be paying on your mortgage
  4. Add your Federal and State tax rates – click on where it says Federal tax rate if you aren’t sure what yours is
  5. Click the [ ] button to expand the Closing Costs section and add the relevant details
  6. Click View Report.

Who is this Calculator for?

This calculator is most useful if you:

  • Want to save yourself money by deducting your interest payments from your taxable income
  • Are filing your tax return and want to know how much you will be saving
  • Need to know your APR, before and after tax

Is it worth paying for mortgage discount points?

This depends on a number of factors, particularly the amount you are borrowing, the interest rate, and the term of the loan. Take a look at our Mortgage Points Calculator – this tool will help you to understand clearly whether or not buying mortgage points is the right decision, depending on your own circumstances. There’s not one solution to suit everyone, so use this free calculator to ensure you are making the best decision for yourself.