Tax Deduction Calculator
Who doesn't love a tax deduction? With this handy Tax Deduction Calculator, you can determine how much money you will receive in a tax deduction just for obtaining a home loan.
The Internal Revenue Service provides discounts on interest paid through a home loan to the homeowner. If you own a home, with a mortgage loan, this helpful deduction cuts down the amount of money that you pay into the tax system each year.
While it may not be your own reason to buy a home, realize that the tax deduction you get for owning a home can be an incentive to buy. |
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This Tax Deduction Calculator makes it easy for you to determine just how much of a tax savings you will have. Here's how to use it.
- Fill in the total amount of money you plan to borrow for a home loan. Do not enter the amount of your down payment, but just the amount you plan to borrow from the lender.
- Enter the interest rate your lender quoted you on the mortgage loan, or use the current average mortgage interest rate available from lenders.
- Then, enter the term of your loan, or the length of time you plan to hold your loan. This is normally 30 years, but some can be shorter or longer, depending on your needs.
Once you hit calculate, you will get a detailed explanation of just how much of a tax deduction this home loan will provide to you.
Since the amount of your tax deduction is dependent on the amount of interest you pay on the loan, this information will change from year to year. However, the Tax Deduction Calculator breaks it down for you based on the current tax guidelines available.
If you notice, you will get the largest deduction, in most types of loans, the first few years you live in your home. During this time, you are paying down less principle and more interest with each of the mortgage payments you make.
Thus, there is more interest to pay. As you pay down the principle, though, you will reduce the amount of interest you pay, thus reducing your eligible tax deduction.
Use this tool to give you an estimate of how much a home loan can save you in taxes. Of course, there are other factors to take into consideration before applying this amount of a tax deduction to your income taxes. Discuss your options with your tax accountant taking the deduction.
Your lender will send you a detailed outline of the actual interest paid in the January following the end of the year. The Tax Deduction Calculator can show some impressive information, though, in terms of how much of a savings this loan can offer. |
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