How is the Tax Benefit calculated?

The tax benefit shown in the summary section is defined by the following equation:

{[(year 1 interest paid) + (year 1 property tax paid- if marked as deductible) + (year 1 MI paid- if marked as deductible) + (Prepaid Interest) + (Points) + (Upfront Premium like UFMIP, Funding Fee, Guaranty Fee)] X decimal form of tax bracket} all divided by 12 to get monthly benefit

So if my loan has the following totals for year 1 and both MI and property tax are marked as deductible:

• 22% tax bracket
• $10,000 interest 
• $250 prepaid interest
• $1,800 property tax 
• $1,500 MI paid 
• $2,500 in points
• $3,000 UFMIP

The calculation would be:

10000 + 250 + 1800 + 1500 + 2500 + 3000 = 19050 (total deductible payments for year 1)

19050 * .22 = 4191 (annual deduction for year 1)

4191 / 12 = 349.25 (monthly tax benefit for year 1)

For the short and long-term tax benefit, the totals of each payment (Interest, MI, UFMIP, Property Tax, Points) for that period added together and multiplied by the decimal form of the tax bracket.

Added new functionality for 2018 tax benefit calculations:

• Added Standard Deduction field to TCA so when entered, the tax benefit will show the greater of either the standard deduction or the mortgage deduction.
• Added field to ask for filing status of the borrower to determine cap of deductible interest per tax year. This field will show up only after you have entered a tax bracket in the Affordability screen. In 2018, Americans will be able to deduct the interest they pay on their mortgages for up to $750,000 in new mortgage debt. Married couples filing taxes separately can claim up to $375,000 in mortgage interest deductions. This is a decrease of the former limit of $1 million for single filers and married couples filing jointly, and $500,000 for married couples filing separately.
• Added checkbox to determine whether to apply the property tax to the benefit calculation. ($10k per year limit). This checkbox will only show up if you have entered monthly property tax.
• Added refinance logic to allow for $1M deductibility cap on grandfathered loans from before 12/16/17
• Added question on all refinances to indicate whether to use cash out for Renovation. Checking yes will include the entire refi amount. Checking no will include only the payoff amount in deductions.
• Add a checkbox on 2nd liens to include in tax benefit. Generally, HELOCs should not be included. Only purchase money 2nds are generally deductible unless the money is used for renovation.
• If your loan amount exceeds the cap, only a percentage of that interest would be deductible. For example, if your cap is 750k, but your loan amount is 800k, only 93.75% of the annual interest would be deductible (750k divided by 800k to get ratio)