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
$5,259/yr
You’ll itemize because total itemized ($50,335) exceeds the standard deduction ($32,200) by $18,135. At your 29.0% combined marginal rate, that saves you $5,259/yr in total. Of that, $5,259 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 5.44% 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 $40k)
$14,000
$8,000 prop tax + $6,000 state
Total itemized
$50,335
interest + SALT + other
Standard deduction
$32,200
MFJ (2026 est)
You should itemize
+$18,135
$18,135 above standard
Year 1
$5,259
$32,335 interest paid
Year 5
$4,780
$30,681 interest paid
Year 10
$3,975
$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 and the higher post-TCJA standard deduction were made permanent. The SALT cap was raised from $10k to $40k for tax years 2025–2029, with a phase-down beginning around $500k MAGI; absent further legislation it reverts to $10k after 2029.
See the full guide for nuance on cash-out refinances, refinance grandfathering, and points deductibility. Tax law is fact-specific, so consult a CPA on edge cases.