How much effect does mortgage interest have on my taxes?

Unless you have enough itemized deductions to exceed your standard deduction, your mortgage interest has no effect at all on your tax due or refund.

It is very hard for a lot of people to use itemized deductions now that the standard deduction is so much higher.  Your home ownership may not have any effect on your tax due or refund, especially if you purchased the house late in the year.  

Standard Deduction

Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund.  The deductions you enter do not necessarily count “dollar for dollar;” many of them are subject to meeting  tough thresholds—medical expenses, for example, must meet a threshold that is pretty hard to reach.  The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you.  Under the new tax laws, some deductions have been capped—there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes. 

2023 STANDARD DEDUCTION AMOUNTS

SINGLE $13,850  (65 or older/legally blind + $1850)

MARRIED FILING SEPARATELY $13,850  (65 or older/legally blind + $1500)

MARRIED FILING JOINTLY $27,700  (65+/legally blind) )  + $1500 per spouse

HEAD OF HOUSEHOLD  $20,800 (65 or older/blind)  + $1850)

It depends, and it's complicated. There is no simple answer. There are a lot of factors involved besides the standard deduction. If you do use itemized deductions, the effect of the mortgage interest depends on how much your other itemized deductions are, how much your Adjusted Gross Income (AGI) is, and other factors. Also, your mortgage interest deduction might be limited if the remaining balance is more than $750,000 ($375,000 if married filing separately).

The best way to answer your question would be to use a tax estimator such as TaxCaster. Enter everything except the mortgage interest and see how much it says your tax would be. Then enter the mortgage interest and see how much of a difference it makes.

And if you have enough total deductions to itemize on schedule A you will only get the benefit of the amount that puts you over the standard deduction.   But you should enter everything in case you can itemize on a state return.