How to Calculate Mortgage Interest Tax Deductions

File an itemized tax return to use your mortgage interest as a deduction.

File an itemized tax return to use your mortgage interest as a deduction.

You can deduct the interest portion of your mortgage payments on your personal tax return when you file with itemized deductions. Though your mortgage holder is required to send you a statement of interest you paid over the past year -- called a Form 1098 -- you can easily get a jump on figuring out your tax picture before it arrives. Lenders are required to send out the 1098 statements by Jan. 31 and your 1098 must be attached to your tax return when you use the interest deduction. Late fees and points also count as interest under the right circumstances.

Assemble your monthly mortgage statements for the tax year you are working on. If you closed escrow on your house during the year and paid points, then hunt down your settlement statement from escrow, as well.

Add up the interest amounts shown on each monthly statement. The monthly statements show the portion of each payment that went to principal, interest and escrow for taxes and insurance. Include only the interest in your calculations.

Sum up any late fees you were charged over the course of the year and add those amounts. Late fees are deductible as home interest if they are not a fee for a specific service.

Find the portion of your escrow that lists the points you paid at loan close. Points might also be called loan origination fees, maximum loan charges, loan discount fee or discount points. In general, points may be deducted in the year they were paid, on a home you use as your main home, if you directly paid into escrow an amount equal to the points. If they were added to your loan costs, rather than being paid by you, you won't be able to do this.

Add the totals in interest, late fees and points to estimate your deductible mortgage costs. When you do your taxes, this figure will be entered into line 10 of "Schedule A (1040) Itemized Deductions," or on line 11, if you paid that interest to a private party from whom you bought the home.

Compare your estimate to the figures provided on the 1098 statement provided by your mortgage holder. If the numbers are different, call your mortgage holder to discuss the differences and resolve the discrepancy.

Items you will need

  • Monthly mortgage statements
  • Escrow statement (if applicable)


  • There are some circumstances under which you might be required to spread your points deduction over a period of years. If you are uncertain, then you should consult a tax professional.
  • If your loans total more than $1 million ($500,000 if you are filing as an individual), or the money on your second loan was used for purposes other than purchase, construction or improvement of your home, you may only be able to deduct a portion of the interest you paid.
  • If you use part of your home for business and are deducting associated costs, this will change the amount you deduct on your mortgage costs. You should consult a tax professional about this.
  • Your home may generate other deductions you can use, including property taxes you paid, energy retrofitting costs, and mortgage tax credit for first time home buyers.

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About the Author

Billie Jo Jannen is a politics and lifestyle columnist in rural San Diego County and a senior copy editor for Demand Media. Her writing and editing career spans 23 years, and she specializes in border and environmental affairs. Jannen's eclectic education includes engineering and horticulture, and she represents the Rural Economic Action League in regional economic development planning.

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