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Cost of mortgage

Cost of mortgage

Old Jun 10th 2012, 8:47 pm
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Default 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.
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Old Jun 10th 2012, 8:59 pm
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Default 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
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Old Jun 10th 2012, 9:04 pm
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Default 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.
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Old Jun 10th 2012, 9:55 pm
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Default Re: Cost of mortgage

Originally Posted by AdobePinon View Post
You can also deduct your local and state income taxes. That might bump it up a bit, along with your property taxes.
Given the OP lives in CA, he's probably paying a sizable amount of state income taxes.

Originally Posted by AdobePinon View Post
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.
"Don't throw money away on rent". Truly one of the most self-servingly simplistic phrases realtors love to use.
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Old Jun 11th 2012, 4:18 am
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Default Re: Cost of mortgage

Originally Posted by Giantaxe View Post
"Don't throw money away on rent". Truly one of the most self-servingly simplistic phrases realtors love to use.
"Throw it away on a realtor".
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Old Jun 11th 2012, 4:42 am
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Default Re: Cost of mortgage

Originally Posted by E3only View Post
Does that mean there is no real advantage.
Sort of.....but you can also claim a whole bucket load of other stuff when you don't take the standard deduction.
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Old Jun 11th 2012, 5:12 am
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Default 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.
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Old Jun 11th 2012, 5:21 am
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Default 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.
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Old Jun 11th 2012, 5:22 am
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Default Re: Cost of mortgage

Originally Posted by E3only View Post
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.
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
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Old Jun 11th 2012, 1:26 pm
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Default Re: Cost of mortgage

Originally Posted by Michael View Post
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
Didn't realise you could deduct car registration...hmmmm
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Old Jun 11th 2012, 1:52 pm
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Default Re: Cost of mortgage

Originally Posted by Michael View Post
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
E3, if this seems a little puzzling, it may help to know that you can deduct state income tax withheld on schedule A, but then next year you'll most likely report any state tax refund as income on your 1040.
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Old Jun 11th 2012, 9:21 pm
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Default 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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Old Jul 31st 2012, 3:59 am
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Default Re: Cost of mortgage

Originally Posted by Michael View Post
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
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?
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Old Jul 31st 2012, 4:48 am
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Default Re: Cost of mortgage

Originally Posted by E3only View Post
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?
"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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Old Jul 31st 2012, 5:34 am
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Default Re: Cost of mortgage

Originally Posted by Giantaxe View Post
"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.
Yup. Without getting the wording right I guess I got my logic ok
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