- Mortgage amount
- Original or expected balance for your mortgage. Taxpayers can deduct
the interest paid on first 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
itemized deductions don't exceed your standard deduction, the benefit
of deducting the interest on your home will be reduced or eliminated.
For 2006 the standard deductions are $10,300 for married couples filing
jointly, $5,150 for married couples filing separately and singles,
and $7,550 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.
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- 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 your loan amount. As long as the points
paid are not a banker's 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.
Disclaimer
Interest and points paid on a mortgage may be tax deductible if you
itemize deductions on your tax return. Use this calculator to see
how much you might save in income taxes. You should consult a tax
advisor for further information regarding the deductibility of interest
and charges.
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