Tax advantages of Home ownership

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irvine_resident_IHB

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Guys,



This forum is extraordinary. I have been browsing this forum for a few months and I am very impressed with the quality.



I have a quick question about the tax advantages of homeownership. How do I get an exact dollar amount for the tax savings?



I looked on the web and did not like what I found. Are there are any general calculations w/o going into specifics like AGIs, tax brackets etc?



TIA
 
If you are a high wage earner paying in the upper tax brackets, your tax savings can be over 30%. However, since you give up the personal exemption when you itemize, and you may be subject to AMT, a good rule of thumb is that your tax benefit is about 25% of the interest payment. We had a more detailed discussion of this phenomenon on the main blog a few weeks ago, and some people even went to Turbotax and ran different scenarios. 25% was the norm.
 
Make friends with a CPA (my best friend is one) and he/she will be able to provide you with very approximate estimates, especially if they're going to be the one filing your return.



That reminds me, I need to buy another case of Widmer for my CPA this January...
 
It depends upon many factors, the main one being your marginal tax rate. The best thing to do is run TurboTax using your numbers or have a tax professional do it for you. My opinion is that there is no tax advantage to buying over leasing.<p>


Uhhh-h-h-h!! Balsphemy !!<p>


To explain further, any tax deductions are already discounted into the selling price of the home as you are bidding against others who are in a similar tax situation.
 
earthbm - Buying may have some advantage if your marginal tax rate is higher than the average buyer of the property type you are buying. Most folks looking at a any particular price level of property have, generally speaking, the same marginal tax rate, therefore any supposed tax advantage is discounted in the price of the home.<p>


And $1,100,000 is the largest loan amounts which may be deducted, and even then AMT and high income threshold levels will limit the mortgage deduction.
 
<p>As Awgee said, spend $19.99 and get a copy of TurboTax or TaxCut and do a copy of your own taxes. Then make one modification and add mortgage interest and property taxes and see what happens.</p>

<p>Even if you turn out to be in the 40% combined category, you're still spending a dollar to get the 40 cents. You're also adding several thousand dollars of taxes you previously didn't have (property), mello-roos, HOAs to get it. You'll also have insurance which, could be trivial or non-trivial. </p>

<p>Today's blog post is a good example. How much are you going to save on income taxes? You're adding $15,000 of taxes, mello-roos and HOA that you previously didn't have.</p>

<p> </p>

<p> </p>
 
While I am on the subject of fallacious taxes ... There are no "corporate taxes". All corporate taxes are passed on to the consumer. Corporate taxes are actually consumer taxes, and just another hidden way for the government to get more of your currency.
 
Ok, let's consider the entire chain...



I can buy, pay interst get the tax benefit.



Or you can buy, pay interest, get tax benefit, rent the house to me, pay income tax on the rent (rent also compensates for mello-roos etc, so there is some double taxation). I rent from you, no tax deduction. The net result is that we jointly get no tax benefit.



Re: taxes in general... this is just another cost, rather than charging you for each time you step on public paved roads, or paying armed thugs to police the neighbourhood, you pay a lump sum to the governmet. I used to live in Bermuda some 10 years ago, zero income tax, all revenue collected via 30% import duty. Nothing is different really, except that you control how much tax you pay by modulating your spending, and the rich obvioussly pay less than they would elsewhere.
 
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