Use the Mortgage Interest Deduction Calculator to estimate the amount of mortgage interest you can deduct on your federal income taxes, based on current tax law and the acquisition debt limits.
Mortgage Interest Deduction Calculator
Maximum Deductible Interest
$0.00Mortgage Interest Deduction Formula
Deductible Proportion: $ \text{Proportion} = \text{MIN} \left( 1, \frac{\text{Debt Limit}}{\text{Total Principal}} \right) $
Deductible Interest: $ \text{Deduction} = \text{Total Interest Paid} \times \text{Proportion} $
Formula Source: IRS Publication 936, Tax Cuts and Jobs Act (TCJA) of 2017
Variables Explained
- Total Mortgage Interest Paid: The total amount of interest paid on your qualified residence loans during the tax year, typically found on Form 1098.
- Total Mortgage Principal: The average outstanding principal balance of your mortgage debt for the year.
- Applicable Acquisition Debt Limit: The maximum principal balance that qualifies for the deduction. For debt incurred after Dec 15, 2017, the limit is generally $750,000 ($375,000 MFS).
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What is the Mortgage Interest Deduction?
The Mortgage Interest Deduction (MID) allows taxpayers who itemize deductions on their federal tax return to reduce their taxable income by the amount of interest paid on certain home loans. This is one of the largest tax expenditures and historically encouraged home ownership in the United States.
The rules for the deduction were significantly modified by the Tax Cuts and Jobs Act (TCJA) of 2017. For loans taken out after December 15, 2017, the debt limit on which interest is fully deductible was lowered from $1 million to $750,000. Interest on home equity debt (not used to buy, build, or substantially improve the home) is generally no longer deductible.
Because the TCJA also significantly increased the standard deduction, many taxpayers who previously itemized no longer receive a benefit from the MID unless their total itemized deductions (including MID, state/local taxes (SALT), etc.) exceed the new, higher standard deduction amount.
How to Calculate the Deductible Interest (Example)
- Determine the Acquisition Debt Limit: Confirm your applicable limit. Let’s use the current standard of $750,000.
- Find the Proportion: Divide the limit by the total mortgage principal. If your principal is $800,000, the proportion is $750,000 / $800,000 = 0.9375 (or 93.75%). If the principal is less than the limit, the proportion is 1.
- Identify Total Interest Paid: Obtain the total interest paid (e.g., $20,000) from your annual mortgage statement (Form 1098).
- Calculate Deductible Interest: Multiply the total interest paid by the proportion. In this example: $20,000 * 0.9375 = $18,750. This is the maximum amount of interest you can claim as a deduction.
Frequently Asked Questions (FAQ)
A: Yes, but only if the funds were used to buy, build, or substantially improve the home that secures the loan. If the funds were used for other purposes (like paying off credit card debt), the interest is not deductible.
Q: What is the difference between the $750,000 and $1,000,000 limits?A: The $1,000,000 limit ($500,000 MFS) applies only to qualified residence debt incurred on or before December 15, 2017. The $750,000 limit ($375,000 MFS) applies to qualified residence debt incurred after that date.
Q: Do I need to itemize to take the Mortgage Interest Deduction?A: Yes. The MID is an itemized deduction. If the standard deduction is higher than the sum of all your itemized deductions (including MID, SALT, etc.), you will generally take the standard deduction and receive no direct tax benefit from the MID.
Q: Where do I find the “Total Mortgage Interest Paid” figure?A: This amount is reported to you by your mortgage lender on IRS Form 1098, Mortgage Interest Statement, which they typically send out in January of the following year.