[quote=flu][quote=FormerSanDiegan]The #1 legal tax break is write-off of interest of your first mortgage. Of course, getting that requires you to leverage real estate which has been a losing proposition the last few years.
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Unfortunately, this itemized deduction I believe also starts getting reduced above certain income levels…
Also, there is a point in which you end up paying AMT….and some itemized deductions won’t count toward AMT (property tax and income tax deductions aren’t part of AMT calculation, for instance).
Ironically, experimenting with my tax software, I think mortgage interest payments are still deductions when computing AMT…..
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Yes, mortgage interest is still deductible under AMT. Property tax and state income tax are not deductible under AMT, but remember there is a large exemption under AMT, so the extent that this impacts someone will depend on their income and total deductions.
Yes, deduction phase outs do start occurring at higher income levels, but these tend to have a smaller impact than AMT for most normal people (making less than 300K)
There seems to be a sweet spot for optimal use of mortgage deduction while falling just below AMT and not impacted by phase outs. Punch in a joint income of 225-250K or so, assume mortgage of 700K-850K into your tax software and see what happens.
