How do I calculate a mortgage interest tax deduction?
Consult your Form 1098, sent to you by your lender, to determine how much you paid in interest over the year. If your mortgage amount is less than $500,000 ($1 million if you are married filing jointly), the entire amount is deductible. If it is more, continue to step 2.Divide your mortgage limit ($500,000 for singles, $1 million for joint filers) by the amount of your mortgage. For example, if you owe $2 million on your mortgage and you are a joint filer, you would divide $1 million by $2 million to get .5. Multiply the result by the amount of interest paid over the year to determine how much you can deduct. In the example, if you paid $140,000 in interest, you would multiply $140,000 by 0.5 to find you could deduct $70,000.Multiply the value of your deduction by your tax bracket to determine how much your mortgage interest tax deduction will be worth.
