Question about mortgage interest tax deductions

[Anonymous]

But that's not the case.

Are you married?

Remember, to itemize that mortgage iterest as a deduction you have to forego your standard deduction.

Standard deduction for 2012 is like $11500 for a married couple.

10,000 - 11,500 = -1,500 (you pay taxes on 1500 more then if you didnt deduct)

Yeah not a good idea.

You have property taxes too that you can deduct, just pointing out that your calcs are missing something very critical.

[Anonymous]

To determine what the tax savings actually may be from owning a home you need to know what your standard deduction is and then calculate exactly how much you will be able to take in deductions if you itemize. Remember, you can deduct not only mortgage interest (to get an idea of how much that will be you can look at the amortization schedule built in to many on line calculators) but also property taxes, state and local income taxes, sales tax, charitable gifts, non-reimbursed job expenses, allowable home office expenses, college tuition, medical and dental expenses, personal property taxes (such as vehicle registration fees), PMI...Turbo Tax lists over 350 deductions so there are many you may qualify for. Without knowing how many deductions you qualify for it is impossible to determine exactly what the tax advantages to itemizing might be.

It's tax time, though, so now is a good time to go over last years records and see what deductible items you would have had and use that to help determine what your total deductions could be after buying a home.

[coluccim]

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@Anonymous wrote:

To determine what the tax savings actually may be from owning a home you need to know what your standard deduction is and then calculate exactly how much you will be able to take in deductions if you itemize. Remember, you can deduct not only mortgage interest (to get an idea of how much that will be you can look at the amortization schedule built in to many on line calculators) but also property taxes, state and local income taxes, sales tax, charitable gifts, non-reimbursed job expenses, allowable home office expenses, college tuition, medical and dental expenses, personal property taxes (such as vehicle registration fees), PMI...Turbo Tax lists over 350 deductions so there are many you may qualify for. Without knowing how many deductions you qualify for it is impossible to determine exactly what the tax advantages to itemizing might be.

It's tax time, though, so now is a good time to go over last years records and see what deductible items you would have had and use that to help determine what your total deductions could be after buying a home.

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This is the correct answer.

Use this years tax return as a guide by filing out schedule A with current year deductions and estimated home deductions (interest, PMI and property taxes) and without the estimated home deductions.

Then, you will know the difference.

[Watchmann]

And let's not forget that there are ideas floating around about limiting or getting rid of the interest deduction.  It probably won't happen but who knows what will happen down the road in some sort of Grand Bargain with the American people.  Personally, I  would not figure the savings in taxes in deciding how much house I could afford.  That may be too soap boxy for you but I wouldn't overly work this issue.  Income goes up and down, divorces occur, kids come along, tax law changes, etc, etc which will change what the deduction may be worth to you.  There are too many variables to use this feature other than on a '30,000 ft level' view.

[Anonymous]

Depends.

There's oh so many other factors...esp factors that don't remain static.

Our first home, we never had enough in interest and taxes, or anything else, to itemize. We used the standard deduction.

This yr it's looking like w having made an extra payment and MIP included we'll get to itemize. But it's close. 

Given all the other invisible increased costs to homeownership, I'd never personally say there's been enough tax benefits to offset squat, never mind enough I felt I could count on to raise the the property price we felt comfortable shopping for or to adjust our holdings.  But that's been our exp. Good luck when you do purchase!