HiI have a question for anyone who is good at taxes. We are buying our first home. We are currently in a condo, but have a low mortgage. Our new mortgage loan amount will be around $252K. After calculating the tax deductible interest costs, I figure our interest costs will avreage around $18,000 for the first several years. My mortgage broker also told me we will have a tax deduction of $17,000 to $18,000 for the first seven years.I want to know what this means to my tax return. Each year we get a return and do not have to pay. Assuming we file single (we are not married) in the 28% tax bracket. Not including other factors (ie. interest earned), what would the increase be in our yearly tax return? I have figured it this way: 18,000 x 28% -= $5,040.00Does this mean our additional tax return on the new home will be around $5,040? We want to make sure we are covered with our tax return to pay our property taxes if we don't include them in the monthly mortgage payment.Any info would be appreciated.Thanks!Cherise
You are correct, your taxes will decrease by your total interest paid times your tax rate. Assuming you aren't affected by AMT, your property taxes should be deductible as well.I would just have the real estate taxes included in the monthly payment just so you don't have to worry about. You might also want to do some tax planning to see if you can get away with having less withheld from your paycheck.
Not necessarily. First problem -- you're not married.Who's name is on the mortgage. If only one of you, then only that person can consider taking the deduction.If both of your names are on the mortgage, then the person who paid the interest gets the dedcution. You don't both get $18,000 in interest deductions.If paid out of a joint account, then you can divide the deduction any way you want as long as neither of you deducts more than s/he contributed to the joint account.Now to the calculation:Probably a little less than $5040 (combined). If you are currently itemizing deductions, you will have to reduce the $5040 by the amount of tax benefit you were receiving for the old mortgage.If you were using the standard deduction, the calculation is a bit more complicated. Add up all your itemized deductions (with the $18,000 interest deduction). Subtract the value of your standard deductions. Take this result and multiply by .28 (assuming 28% bracket). Ira
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |