Mortgage Interest Deduction
How much does your mortgage actually save you in tax?
Loan originated
Pre-TCJA loans grandfathered to $1M cap. Post-TCJA capped at $750k.
Filing status
Annual tax savings from mortgage interest
$4,447/yr
You’ll itemize because total itemized ($46,335) exceeds the standard deduction ($31,000) by $15,335. At your 29.0% combined marginal rate, that saves you $4,447/yr in total. Of that, $4,447 is the marginal value of the mortgage interest deduction (i.e., what you would lose if your mortgage interest were $0). Your after-tax mortgage rate is 5.61% instead of the 6.5% nominal.
Year 1 mortgage interest paid
$32,335
Total monthly P&I: $3,160
Deductible interest
$32,335
Full amount deductible
SALT (capped at $10k)
$10,000
$4,000 lost to cap
Total itemized
$46,335
interest + SALT + other
Standard deduction
$31,000
MFJ (2026 est)
You should itemize
+$15,335
$15,335 above standard
Year 1
$4,447
$32,335 interest paid
Year 5
$3,968
$30,681 interest paid
Year 10
$3,163
$27,908 interest paid
What this models — and what it doesn’t
Acquisition indebtedness only. The $750k/$1M cap applies to debt used to buy, build, or substantially improve your residence. Cash-out refinances for other purposes are not deductible interest.
Home equity loans/HELOCs: deductible only if proceeds used for qualifying home improvements. The pre-2018 deduction for any HELOC use was eliminated by TCJA.
Second homes count: the cap is combined across primary + 1 second home. Three+ homes — pick which two.
Married filing separately: each spouse gets HALF the cap ($375k or $500k). Often a marriage penalty in HCAs.
PMI/MIP deduction: expired after 2021 and not currently renewed. Don’t count on it.
OBBBA (July 2025): the One Big Beautiful Bill Act averted the TCJA sunset. The $750k mortgage cap, $10k SALT cap, doubled standard deduction, and elimination of personal exemptions were largely made permanent. Verify the exact current standard deduction for your filing year.
See the full guide for nuance on cash-out refinances, refinance grandfathering, and points deductibility. Tax law is fact-specific — consult a CPA on edge cases.