Somebody please help me understand how the mortgage tax deduction works.
So lets say I'm gonna buy a 500k house with 20% down and a 4% rate. I'm married so my standard deduction is what 12k? something like that.
Now when I use online calculators it says my tax savings on the 1st year would be $6160 but I just don't see how is that possible. If I'm paying off a 400k loan total interest paid during the first year should be about 15k. Thats only 3k more than standard deduction. Right? So mine and my wifes taxable income would only be lowered by 3k (compared to the standard deduction we couldve claimed). So in the end the whole thing would net me $750.
Please tell me if I'm calculating this wrong. I totally might be.
Re: Somebody please help me understand how the mortgage tax deduction works.
Hard to say without seeing the calculator. Perhaps it is providing an estimate for your tax deductible property taxes and points (origination fees) and is then adding those to the mortgage interest and giving you your total savings from the entire deduction instead of the net. That's my best guess.