How Much of a Tax Deduction Can You Receive through Your Mortgage?
Throughout the course of your mortgage, the interest on your mortgage payments will be one of the most significant deductions you can make on your annual income taxes. With historically-low interest rates, you can save thousands of dollars by locking in a low interest rate on your home loan or refinance, plus have thousands of dollars deducted on your annual income taxes.
With the mortgage tax deduction calculator, you can get an idea of exactly how much you’ll be able to deduct from your taxes each year through your mortgage. Contact Homesite Mortgage if you have questions about how much you could save in tax deductions through your mortgage.
Mortgage Tax Deduction Calculator Definitions
- Total Home Loan Amount: This is the total amount of the loan that you borrowed in order to purchase your home. Take note that this doesn’t include the down payment. If you purchased a $200,000 home and made a 20% down payment of $40,000, your total home loan amount will be $160,000.
- Annual Interest Rate: Your annual interest rate is the interest rate that’s charged on top of your loan amount. The lower your annual interest rate, the less your monthly mortgage will be.
- Term of Loan: The term of loan is how long your mortgage is scheduled to be repaid. A 30-year mortgage means you’ll be making mortgage payments for 30 years, and the same goes for a 15-year mortgage.
- Savings: The chart of savings show how much you can expect to deduct from your taxes each year. The deduction amount decreases each year because the deduction comes from the interest you’re paying on the loan. The longer you’ve been paying off your mortgage, the more you’re paying off the principal of the loan, as opposed to interest. In the initial years of your mortgage, your monthly payments are largely going toward interest, which is why the deduction amount is so high at the start of the chart.
- Tax Deduction: A tax deduction is an amount of money that can reduce your total income taxes. Because what you pay in taxes is dependent on your income, if you can lower your total income through deductions such as your mortgage, you will likely have to pay less in income tax. Use the mortgage tax deduction calculator to see how much you potentially see in tax deductions solely with your mortgage.
Mortgage Tax Deduction Calculator FAQs
What is allowed to be used as a deduction?
You can deduct qualified home mortgage interest. Additionally, mortgage insurance purchased through the Department of Veterans Affairs or Rural Housing Service (frequently referred to as the funding fee or guarantee fee) can be deducted. Get in touch with your mortgage insurance provider to determine the amount available to deduct.
Since we are a Licensed Mortgage Lender only and not a certified public accountant, you will want to ask your CPA to verify what deductions personally you are eligible for.
Can I deduct mortgage interest from my taxes if I rent out my second home?
In the situation of renting out a home, you must personally use the space for 14 days or 10% of the number of days you rent out the space (whichever figure is larger) in order to take advantage of tax deductions on your second home. If you don’t meet the required days, the home is not treated as a second home, but as a rental property.
Who is allowed to take the tax deduction for a mortgage?
Whoever the primary borrower is to the home loan will be the one to take the tax deduction. If you and your spouse both signed the loan, then the two of you are the primary borrowers. If you are helping a family member with their mortgage payments, you can only deduct the interest from your taxes if you co-signed the loan.
What can be counted as mortgage interest on my taxes?
Mortgage interest can come from several sources, not just the mortgage of your primary residence. In addition to your primary mortgage, mortgage interest can be deducted from your taxes for a second home, a line of credit, or a home equity loan.