How the calculator works
The mortgage interest deduction only lowers your tax if you itemize, and you only itemize when your itemized deductions are larger than the standard deduction. So the calculator works out your federal tax twice, once with your mortgage deductions and once without, each time using whichever is larger: itemizing or the standard deduction. The difference is what the mortgage actually saves you.
- Loan limit. If your average balance is above $750,000 (or $1 million for debt from on or before December 15, 2017; half those amounts if married filing separately), only a share of the interest counts: interest × limit ÷ average balance, as in IRS Publication 936, Table 1. Deductible points get the same share.
- Mortgage insurance. For 2026 and later, PMI and similar premiums count as mortgage interest again, reduced by 10% for each $1,000 of AGI over $100,000.
- SALT cap. Property tax plus state and local income tax is capped at $40,400 for 2026. The cap drops by 30% of income over $505,000, but not below $10,000.
- Tax. Taxable income is AGI minus your deduction, run through the 2026 rate tables. Taxpayers in the 37% bracket have their itemized deductions trimmed by 2/37 under the new section 68 limit.
| Item | Single | Married jointly | Head of household |
|---|---|---|---|
| Standard deduction | $16,100 | $32,200 | $24,150 |
| Extra per box (65+ or blind) | $2,050 | $1,650 | $2,050 |
| SALT cap | $40,400 | $40,400 | $40,400 |
| Acquisition debt limit (post-2017 loan) | $750,000 | $750,000 | $750,000 |
| 37% bracket starts above | $640,600 | $768,700 | $640,600 |
Married filing separately: standard deduction $16,100, SALT cap $20,200, debt limit $375,000.
Worked example
A married couple filing jointly has $220,000 of AGI and a $600,000 mortgage at 6.5%, taken out in 2023. They pay about $39,000 of interest, $9,000 of property tax, $14,000 of state and city income tax, and give $3,000 to charity.
- The loan is under $750,000, so all $39,000 of interest is deductible.
- SALT is $23,000, under the $40,400 cap.
- Itemized total: $39,000 + $23,000 + $3,000 = $65,000, versus a $32,200 standard deduction.
- Without the mortgage they would have $26,000 of itemized deductions and take the $32,200 standard deduction instead.
- Itemizing lowers their taxable income by an extra $32,800. All of it falls in the 22% bracket, so they save about $7,216.
That is about 18.5% of the interest they paid, not 22%, because the first $6,200 of the interest only replaced the standard deduction they would have had anyway. Their after-tax mortgage rate works out to about 5.3%.
Edge cases
- Married filing separately. If your spouse itemizes, your standard deduction is zero and you must itemize too.
- Home equity loans and HELOCs. Interest counts only if the money bought, built or substantially improved the home securing the loan.
- Co-ops. Interest on a co-op share loan and your share of the building's mortgage interest can qualify. See the co-op maintenance tax deduction calculator.
- Not included: tax credits, capital gains rates, AMT, the separate senior deduction, and state income tax. New York has its own itemized deduction rules.
- 2026 forms. The IRS had not yet released the 2026 Publication 936 or Schedule A instructions when we checked. Confirm the details, especially for PMI, when they come out.
What to do next
Read the full rules in our mortgage interest deduction guide and SALT cap guide. If the deduction is small, your real borrowing cost is close to your mortgage rate. Use that rate in the pay off mortgage or invest calculator.