Mortgage Real Cost Calculator,  or  "Should I pay off my mortgage?"

Thinking of paying off or prepaying your mortgage?  This tool will help you decide.  Read on...

Most people calculate the true cost of their mortgage as their interest rate, less any tax savings from an interest deduction on their tax return.  They may think, "Well, my mortgage rate is 6%, and I'm in the 25% tax bracket, so my true rate is 4.5%" (the federal government lets them write off the interest, with a 25% tax savings, so their net cost is 75% of their rate.  Essentially, they think the Federal Government pays 25% of the mortgage).  Well, that thinking is not entirely accurate.  Because the federal government gives every taxpayer the option of taking a Standard Deduction, whether they are a renter or have a mortgage, their actual tax savings may not be the 25% (or whatever their marginal rate is).   Even if they pay off their mortgage, they still get the Standard Deduction.

Furthermore, taxpayers earning over $83400 may have their Itemized Deductions limited, so their tax savings are also less than anticipated.   If your income reaches a certain level, you may not get to write off your mortgage at all!

In fact, the tax savings you receive from your mortgage interest is dependent on your income, age, filing status, and a number of other variables.   This calculator accounts for these issues, determining your actual tax savings from mortgage interest.

There are several numbers from your tax return needed to make the calculations.   Please refer to your last year's 1040 tax return, or estimate the values for the coming year. Leave the line blank if it does not apply.

NOTE: In order to receive an interest deduction, you must Itemize your deductions (fill out Schedule A), and file Form 1040 with the IRS.  If you filed (or plan to file) Form 1040A or 1040EZ, or you do not expect to Itemized your deductions, leave the fields that do not apply blank.
Be sure to Email this page to a friend, as this information is crucial, and this calculator is available nowhere else!

Mortgage considered
Average balance of mortgage this year $      Interest Rate (APR) %      Est Interest paid this year $
Enter the following amounts from last year's 1040 tax return (or estimate this year's)
Filing Status	Single Married Filing Jointly Married Filing Separately Head of Household Qualifying Widower
Total number of exemptions claimed (1040, Line 6d)
Check If	You were born before Jan 2, 1942 Blind Spouse was born before Jan 2, 1942, Blind Spouse itemizes on Separate return, or your were dual-status alien
Qualified Dividends (1040, Line 9b) $
Capital Gain (1040, Line 13) $
Adjusted Gross Income (1040, Line 37) $
Exemptions deduction (calculated) $	Limited because of your income
Total Tax Credits (1040, Line 55) $	(Include only those you expect to be ongoing)
Other Forms (leave blank if not applicable)...
Long Term Capital Gain (Sch D, Line 15) $
Long & Short Term Capital Gain (Sch D, Line 16) $
Long Term Capital Gain (Form 4952, Line 4g) $
From Schedule A (leave blank if not applicable)...
Medical & Dental (Sch A, Line 4) $
Taxes Paid (Sch A, Line 9) $
Investment Interest Paid (Sch A, Line 13) $
Total Interest Paid (Sch A, Line 14) $	(Include $ interest on above mortgage)
Gifts to Charity (Sch A, Line 18) $
Casualty/Theft Losses (Sch A, Line 19) $
Job/Other Expenses (Sch A, Line 26) $
Misc Deductions (Sch A, Line 27) $	Portion of Line 27 that is due to Gambling or Casualty/Theft Losses $
Itemized Deductions allowed (calculated) $	Limited because of your income Standard Deduction taken, as it is greater than Itemized
Itemized Deductions with Mtg paid off (calculated) $	Limited because of your income Standard Deduction taken, as it is greater than Itemized
Your Income Tax
Taxable Income (calculated) $
Taxable Income with Mtg paid off (calculated) $
Federal Income Tax (calculated) $	Your marginal rate %           No Alternative Minimum Tax AMT possibility! Use AMT worksheet.
Federal Income Tax with Mtg paid off (calculated) $	Your new marginal rate %     No Alternative Minimum Tax AMT possibility! Use AMT worksheet.
Summary

Note:  If the AMT alert is checked, it does not mean you owe the Alternative Minimum tax.  It means you must check the AMT worksheet to verify.

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