How Do I Calculate the Mortgage Tax Deduction?

To calculate the mortgage tax deduction, add up the deductible interest on your Form 1098, cut it with the IRS Publication 936 worksheet if your average mortgage balance is above $750,000, and add it to your other itemized deductions. For most filers, the tax savings come only from the amount by which that total exceeds your 2026 standard deduction ($16,100 single, $32,200 married filing jointly), multiplied by your tax bracket. That figure is usually much smaller than your interest times your tax rate.

Step 1: Total your deductible mortgage interest

Start with box 1 of each Form 1098 your lender or servicer sends by January 31. Box 1 shows the interest you paid during the year, not counting points. Then adjust it:

1. Add points you can deduct this year. Box 6 shows points paid to buy your main home. Points on a second-home loan, and most refinance points, are deducted a little each year over the loan term; the share of refinance points tied to substantially improving your main home can be deducted in the year paid if you meet the IRS tests.
2. Add mortgage insurance premiums from box 5, deductible again starting in 2026, if your adjusted gross income (AGI) is $109,000 or less ($54,500 if married filing separately). If you prepaid several years of private or FHA mortgage insurance, deduct only this year's share, spread over the shorter of the loan term or 84 months.
3. Subtract interest on home equity money you did not use to buy, build, or substantially improve the home that secures the loan, such as the part of a HELOC used to pay off a car. Routine repairs do not count as improvements.
4. Add interest not shown on a Form 1098, such as interest paid to a seller who financed your purchase.

The mortgage insurance amount shrinks once AGI passes $100,000. You lose 10% of the premiums for each $1,000, or part of $1,000, of AGI above $100,000 (each $500 above $50,000 if married filing separately). For example, with AGI of $104,000 and $1,800 of premiums, you lose 40% and can deduct $1,080 ($1,800 x 0.60).

If you want to check the interest figure against your payments, how your payment splits between principal and interest shows how the split changes over the loan.

Step 2: Prorate the interest if your balance is over $750,000

If all of your mortgage debt was used to buy, build, or substantially improve your home and your combined average balance stayed at or below $750,000 ($1 million for loans from before December 16, 2017; half those amounts if married filing separately), all of the interest from Step 1 is deductible and you can skip this step. The limits on mortgage debt explain which cap applies to each loan.

Above the limit, Table 1 in Publication 936 has you deduct this fraction of your interest: your limit divided by your average balance. You can figure the average balance by adding the balance on the first and last days the loan secured your home during the year (usually January 1 and December 31) and dividing by 2, as long as you did not borrow more during the year, did not prepay more than one month's principal, and made level payments. If the loan secured your home all year and you paid interest at least monthly, you can instead divide the year's interest by the interest rate (the lowest rate of the year, if it changed). You can also use the average balance your lender reports.

Worked example. A single filer took out a $1,000,000, 30-year mortgage at 6.25% in January 2023.

Deductible points are cut by the same 0.785 ratio.

Step 3: Add your other itemized deductions and compare

Add the result from Step 2 to the rest of your Schedule A deductions. For most homeowners, the large ones are:

• State and local taxes, including property taxes, up to a combined $40,400 for 2026 ($20,200 married filing separately). The cap shrinks if modified AGI is above $505,000 ($252,500 married filing separately).
• Charitable gifts, minus a new 2026 floor: if you itemize, only gifts above 0.5% of your AGI count.

Then compare that total with your 2026 standard deduction.

People who are 65 or older or blind get a larger standard deduction, shown in the Form 1040 instructions. Also starting in 2026, people who take the standard deduction can deduct up to $1,000 ($2,000 married filing jointly) of cash gifts to charity. If you give cash, add that amount to the standard deduction side before you compare.

Step 4: Estimate the tax you actually save

Your marginal tax rate is the rate on your last dollar of taxable income. If you would take the standard deduction without your mortgage, multiply the amount by which itemizing beats the standard deduction by that rate. If your other deductions already beat the standard deduction, multiply your deductible mortgage interest itself by the rate. The 2026 brackets for the two most common filing statuses:

Example: a typical married couple. A couple filing jointly has AGI of $160,000 and a $350,000 mortgage at 6.25%. Form 1098 shows $21,500 of interest. Their AGI is too high for any mortgage insurance deduction. They paid $6,500 in property tax and $8,000 in state income tax, and gave $3,000 in cash to charity.

• Itemized: $21,500 interest + $14,500 state and local taxes + $2,200 charity ($3,000 minus the $800 floor) = $38,200.
• Standard: $32,200 + $2,000 cash charity deduction = $34,200.
• Itemizing wins by $4,000. Their taxable income is in the 22% bracket, so the saving is about $880 ($4,000 x 0.22).

Multiplying the full $21,500 of interest by 22% would suggest $4,730, more than five times the actual benefit.

Example: the jumbo loan from Step 2. The single filer has AGI of $420,000 and paid $45,000 in state income and property taxes, which the cap limits to $40,400. That $40,400 alone beats the $16,100 standard deduction, so this filer would itemize even without a mortgage. The mortgage's own value is therefore the full $46,910 of deductible interest times the 35% bracket, about $16,419. Comparing the full $87,310 with the standard deduction would overstate the mortgage's value at about $24,924.

If the extra deductions move part of your income into a lower bracket, this estimate runs a little high; running your return both ways in tax software gives the exact figure. Starting in 2026, filers whose taxable income reaches the 37% bracket have their itemized deductions cut by up to about 5.4%, which trims the benefit further.

Adjusting for a mortgage credit certificate

If a state or local housing agency issued you a mortgage credit certificate (MCC), figure the credit first on Form 8396, then reduce your interest deduction by it.

1. Multiply the interest paid on the certified loan amount by the certificate credit rate.
2. If the rate is above 20%, cap the credit at $2,000.
3. Subtract that credit from your mortgage interest before Step 3.

For example, with a 25% certificate rate and $14,000 of interest, 25% equals $3,500, which the cap cuts to $2,000. Your deductible interest drops to $12,000. The credit itself is also limited by your tax bill, and any unused credit can carry forward up to 3 years. For more on the credit itself, see how to calculate a mortgage credit certificate.

To confirm each loan qualifies before you start, see whether you can deduct your mortgage interest. Other deductible closing and loan costs are in mortgage costs you can deduct besides interest, and the full set of homeowner breaks is in tax benefits available to homeowners.