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Home ownership tax benefits

By BayArea follow BayArea   2019 Sep 28, 1:13pm 1,864 views   7 comments   watch   nsfw   quote   share      


Hi guys, need a sanity check for home owner tax benefits in 2019:

a.) mortgage interest deduction up to $750k of loan balance (but you then forfeit the $24k standard deduction)

b.) property tax deduction up to $10k SALT

Here is the question I’m trying to answer. Say my son’s rent is $3250/mo. He’s married and filing jointly. What house price would put his monthly payment at an equivalent $3250/mo AFTER all tax benefits.

Can anyone assist me with that math?
1   B.A.C.A.H.   ignore (1)   2019 Sep 28, 1:52pm     ↓ dislike (1)   quote   flag        

Don't forget that your commute cost is actually part of your housing cost.
2   BayArea   ignore (1)   2019 Sep 28, 2:30pm     ↓ dislike (0)   quote   flag        

Also, as high earning renter (married with combined income of $300k), what SALT deductions would he be taking currently?

I’d like to understand how much of that $10,000 SALT deduction limit he has remaining for property tax if he chose to buy a house.
3   B.A.C.A.H.   ignore (1)   2019 Sep 28, 2:46pm     ↓ dislike (0)   quote   flag        

hmmmm....... what about Boise?
4   BayArea   ignore (1)   2019 Sep 28, 3:32pm     ↓ dislike (0)   quote   flag        

Who can do the math?
5   Fortwaynemobile   ignore (3)   2019 Sep 28, 3:53pm     ↓ dislike (0)   quote   flag        

His prop taxes alone will go past 10k cap on salt. It’s about 1.5% of price.

So entire mortgage payment not including tax write off
6   clambo   ignore (5)   2019 Sep 28, 4:09pm     ↓ dislike (0)   quote   flag        

I don't know how to answer the question, but remember that the capital gains in that house will be TAXED a lot in California.

Federal capital gains tax, Federal Obamacare real estate tax (3.8%), California real estate capital gains tax will add up.
7   Hircus   ignore (0)   2019 Sep 28, 6:04pm     ↓ dislike (0)   quote   flag        

I know this doesn't really answer your tax-focused question, but it seems somewhat on topic regardless:

I think there's a lot of variables in the rent vs buy decision. I recommend using a calc like:

https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html
https://smartasset.com/mortgage/rent-vs-buy

Especially the NYT one, the way the sliders give you a preview of how each variable affects the outcome via the shaded slope, is very valuable in learning about how each variable contributes and changes in response to other variables.

It's a very complicated topic. The calcs only do so much, but there's more optimization to be found when considering the other tax impacts the decision will have on your life, and also when. i.e., clambo mentioned the 3.8% tax, which applies to joint filers w/ AGI > 250k. But, that only really matters in the yr you sell the house. It's like the possibilities of the calculation never ends lol.

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