How much am I going to save on TAX???

[usctrojancpa]

The interest you pay on the first year of your mortgage is approximately $300,000 * Interest Rate. You can typically deduct the amount of your mortgage interest (as well as property tax!) from your taxable income. This means you'll save approximate 25% (your tax bracket) of your mortgage interest (and prop tax) in taxes.

Ok, so...
300K x 0.045 (4.5%) = 13,500
13500 x 0.25 = $3,375

3375/12 = $281/month

Is this correct??

I'm calculating of interest of about $13,400 for the first 12 payments.  Lets assume your property taxes are $6,000 then...

($13,400 + $6,000) * (25% + 8%) = ~ $6,400/yr or around $533/mo

Oh, wait, where does that 8% came from????

That's the estimated marginal tax rate for the STATE income taxes.

 

[usctrojancpa]

i say always deduct your MR.  i was audited, submitted my prop tax bills w/ mello roos...  wasnt even noticed. 

Yup, like I said....your chances of getting the MR deduction disallowed are slim to none because the MR is billed with the properties on the property tax roll. 

 

[rkp]

And to your original question on understanding your tax benefits, do what I did.  Plug in the numbers in turbo tax or whatever tax program you are using to last years return and see what you would have saved.  It really helped me understand it for my exact situation vs a rough number.

I tried it.
It only gave me $320/month save. I was expecting something about $500/month saving according to that rough calculation... 
I don't know why I am getting only this much saving....

I would go with the $320 vs a rough calculation.  You might be hitting AMT or other situations..I am not a tax expert but I am a believer that a computer program will follow rules exactly and not give you a bogus number. 

 

[usctrojancpa]

And to your original question on understanding your tax benefits, do what I did.  Plug in the numbers in turbo tax or whatever tax program you are using to last years return and see what you would have saved.  It really helped me understand it for my exact situation vs a rough number.

I tried it.
It only gave me $320/month save. I was expecting something about $500/month saving according to that rough calculation... 
I don't know why I am getting only this much saving....

I would go with the $320 vs a rough calculation.  You might be hitting AMT or other situations..I am not a tax expert but I am a believer that a computer program will follow rules exactly and not give you a bogus number. 

Agreed, the $533 was the max possible benefit per month.  Without knowing someone's exact tax situation it is hard to come up with a very accurate number.  AMT can eliminate the entire property tax deduction fairly quickly.

 

[thelinux]

Thank you everyone.
Because I can save only $300, I guess it makes sense to buy cheaper house and borrow less..

 

[rkp]

In our math for looking at houses, we dont even factor tax benefits and plan on treating it as a bonus or extra.  You never know what will happen to tax laws and deduction limits so I wouldnt cut it so close.  Basically I would not even factor in $300 in your affordability math.