Mortgage Tax Benefits Calculator
It is possible to use your mortgage payments to reduce your taxable income. The mortgage tax benefits calculator is a free tool available for borrowers to estimate the tax benefits they could get by taking out a mortgage on a certain property. On entering the required information, the calculator provides a breakdown of taxes, points, and deductions.
Tax Benefits of Buying
One of the biggest advantages of becoming a homeowner is that you can leverage your mortgage interest payments into tax deductions. If you own a home and your mortgage does not exceed $750,000 then you can deduct the interest you pay on the loan. The limit for these deductions used to $1 million however after the Tax Cuts and Jobs Act of 2017 (TCJA) was passed the limit was changed to $750,000 and will remain that way throughout 2025 and end by 2026. Your lender will provide you with IRS Form 1098 which will provide details about the interest payments that you have already made.
This tax benefit covers:
- Mortgage taken out to purchase your home
- A second mortgage
- Line of Credit
- Home Equity loan
What documentation do I need for this Tax deduction?
In case the IRS requires you to provide any documentation you can provide the following:
- Copies of the IRS Form 1098
- Closing statements from refinancing, if applicable
- Name, Social Security Number, and address of the property’s seller
- The previous year’s Federal tax returns
How to claim the mortgage interest as a deduction?
To do this you will first need to itemize your deduction using the IRS Form 1040 to file taxes and Schedule A for reporting of itemized expenses. On Schedule A all your interest payments and points will be combined to reduce your taxable income.