Cost of mortgage
Hi guys,
We are trying to work out a true way of cost of our potential mortgage which got me thinking and hence the question. We file married jointly and my does not work. So if we were to NOT buy a home I would claim $11,900 (?) standard deduction right? The question I have is, when I do buy a home, I would itemize. In that case working based on an assumption that my Interest Component of the mortgage is 1,000 a month (earlier in the 3o year fixed term) my total annual out of pocket would be 12,000. Does that mean there is no real advantage. What I am trying to understand is for taxes I could claim only 12k which is not that far off the standard deduction. Do I understanding this right? I appreciate there may be other things that I can deduct e.g. we roughly donate 1% of our household income to charities, we will pay property taxes etc. Could someone clarify? Thanks. |
Re: Cost of mortgage
Just on other thoughts, depending on where, who with and how much you put down, you've got to factor in the insurance and property tax payments into that monthly mortgage payment that might go into escrow.
For the other stuff, I'll let home owners answer :) |
Re: Cost of mortgage
You can also deduct your local and state income taxes. That might bump it up a bit, along with your property taxes.
Realtors love to tell you how much you'll be 'saving' on taxes when you buy a home, but reality can be different. If, for example, your rent is cheap, you may be better off for the short term paying tax on the difference and pocketing the change. But if you want to buy a house, don't let that stop you. |
Re: Cost of mortgage
Originally Posted by AdobePinon
(Post 10111273)
You can also deduct your local and state income taxes. That might bump it up a bit, along with your property taxes.
Originally Posted by AdobePinon
(Post 10111273)
Realtors love to tell you how much you'll be 'saving' on taxes when you buy a home, but reality can be different. If, for example, your rent is cheap, you may be better off for the short term paying tax on the difference and pocketing the change. But if you want to buy a house, don't let that stop you.
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Re: Cost of mortgage
Originally Posted by Giantaxe
(Post 10111341)
"Don't throw money away on rent". Truly one of the most self-servingly simplistic phrases realtors love to use.
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Re: Cost of mortgage
Originally Posted by E3only
(Post 10111250)
Does that mean there is no real advantage.
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Re: Cost of mortgage
Thanks. Here is some other relevant information
Rent = 1,800 for a small 900 sq foot place. Looking to buy something around 425-450K around 1600 sq foot. Estimating Mortgage around 1800 pm Property taxes 1.2% HOA 250 a month Insurance got no idea could be 50 a month?? My mortgage and rent payment will net out. Of course I realize there are other outgoings however, I will gain in tax deductions - no idea how much though. I don't understand the reference to State taxes deductibility? Can someone throw some numbers so it makes more sense OR guide me on how to get there? All I am really looking for is a proxy net out of pocket. I know there are moving parts so any input appreciated. |
Re: Cost of mortgage
You have to pay state taxes anyway but if you itemize you can claim them as a deduction.
Property taxes are going to be about $4,500 but you can also deduct these. The value of the deductions to you depends on your tax rate. |
Re: Cost of mortgage
Originally Posted by E3only
(Post 10111756)
Thanks. Here is some other relevant information
Rent = 1,800 for a small 900 sq foot place. Looking to buy something around 425-450K around 1600 sq foot. Estimating Mortgage around 1800 pm Property taxes 1.2% HOA 250 a month Insurance got no idea could be 50 a month?? My mortgage and rent payment will net out. Of course I realize there are other outgoings however, I will gain in tax deductions - no idea how much though. I don't understand the reference to State taxes deductibility? Can someone throw some numbers so it makes more sense OR guide me on how to get there? All I am really looking for is a proxy net out of pocket. I know there are moving parts so any input appreciated. http://www.irs.gov/pub/irs-pdf/f1040sa.pdf |
Re: Cost of mortgage
Originally Posted by Michael
(Post 10111765)
State income taxes are one of the biggest federal tax deductions. If your employer withholds $8,000 per year in state income taxes, that is a deduction against income. There are other smaller deductions such as car registration fee minus about $50. See schedule A for more information.
http://www.irs.gov/pub/irs-pdf/f1040sa.pdf |
Re: Cost of mortgage
Originally Posted by Michael
(Post 10111765)
State income taxes are one of the biggest federal tax deductions. If your employer withholds $8,000 per year in state income taxes, that is a deduction against income. There are other smaller deductions such as car registration fee minus about $50. See schedule A for more information.
http://www.irs.gov/pub/irs-pdf/f1040sa.pdf |
Re: Cost of mortgage
We have a mortgage and we've done both - taken the standard deduction and not taken it. We put the figures into Turbo Tax each year and go with whatever saves us most money (or costs us least whichever way you look at it). It has changed over the years depending on things like childcare costs, whether both of us were working, etc.
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Re: Cost of mortgage
Originally Posted by Michael
(Post 10111765)
State income taxes are one of the biggest federal tax deductions. If your employer withholds $8,000 per year in state income taxes, that is a deduction against income. There are other smaller deductions such as car registration fee minus about $50. See schedule A for more information.
http://www.irs.gov/pub/irs-pdf/f1040sa.pdf Let's say my Interest payments on mortgage are 15,000 a year. Property taxes 5,000 a year, Donations 600 a year, Car registration 100. Assume 100k income I get a rough 4700 state tax. Total 25,400. Am I right in saying in this case my incremental benefit to my taxes is 25,400 (-) 11,900 standard deduction that I would get regardless? |
Re: Cost of mortgage
Originally Posted by E3only
(Post 10202122)
Just one clarification, please.
Let's say my Interest payments on mortgage are 15,000 a year. Property taxes 5,000 a year, Donations 600 a year, Car registration 100. Assume 100k income I get a rough 4700 state tax. Total 25,400. Am I right in saying in this case my incremental benefit to my taxes is 25,400 (-) 11,900 standard deduction that I would get regardless? |
Re: Cost of mortgage
Originally Posted by Giantaxe
(Post 10202153)
"Incremental benefit to my taxes" is a little sloppy. The _incremental deduction from income_ would be 25,400 - 11,900. The actual _value_ of that incremental deduction depends on what tax rate that income would otherwise have been taxed at.
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