let’s just go with someone that makes $200k a year and married.
for the income up to $130k, you are taxed at 19%. but your 70k is taxed at 28%. So you pay 26.6k in income tax plus the 19.6k for total of 46.2k in fed taxes.
now let’s say you buy a house for $600k with 20% down. your monthly mortgage is $2700 and your property tax yearly is $6000. assuming 90% of that 2700/month is interest, your total yearly mortgage interest + property tax would be 35.2k.
you are now not taxed at $200k, but you are now tax’d at $164.8k. you still have to pay the $26.6k in income tax for the amount up to $130k, but you are now just on the hook for 28% of 34.8k, which works out to be $9744.
so your total tax saving (federal) is basically 10k. so in short, you get back 28% of your total mortgage interest and property tax.
so the question is, will you be able to rent the same home for the same amount? well, you need to add $2000 for insurance and generally add another $50/month for HOA, so your yearly cost of homeownership on a $600k home is $27800 after adding those and subtracting the $10k from your fed taxes.
then the question is, what can you get these days for $600k? would it be a better home than something you can rent for $2300/month? and remember, we haven’t even looked at the state tax savings with all of this.
