San Diego Housing Market News and Analysis

I don't know of any online calculator, there are many subtleties.

General formula:

- Take standard deduction for your status (in 2008, $10900 if married filing jointly, $5450 if single)
- Subtract your state tax (http://www.ftb.ca.gov/individuals/tax_ta...)
- Subtract your property tax
- If the resulting figure is greater than zero, subtract it from interest paid
- Multiply by your tax bracket. If your friends are thinking of buying and they are not making six figures, they are probably in the 25% bracket.

That will give you the approximate amount. They will save less if all deductions push their taxable income out of the 25% bracket (below $65,100), more if they have other itemized deductions.

Another way I've seen it done is:

- Take 1 year of mortgage interest and divide by 3200.
- The result is the number of dependents you can exclude on your W4. (for example, $32,000 of mortgage interest is like having 10 dependents.)
- Take extra amount you will receive from each paycheck and multiply by the number of paychecks you get in 1 year.
- Result is the part of your tax refund from ownership of that property (and having the deductible mortgage interest).

If you want the extra cash each paycheck, you simply change your W4 with the new exclusions. Note: If you do this, your refund at tax time will be smaller.

The best calculators are whatever software they filed their 2007 taxes with (turbo or taxcut). Just open the completed return and input the estimated mortgage interest and r/e taxes, then save the return under a different name. Then compare it to the return that they actually filed. That is the best way to figure one's unique situation. As a ballpark figure I use the "T",the "I" and the basic maintenance in the PITI, so when I figure out the principal and interest, that is the out of pocket amount, the taxes, insurance and basic maintenance are offset by the tax deduction. Don't let anyone talk you into how great the mortgage interest deduction is, a wise man who had his house paid off once asked me "would I rather pay three dollars to the bank or one to the government?"