This subject always makes the hair on my back stand on its end (I am a hairy fellow 🙂 )
When a relator hits me with the comment ” You will save so much on taxes because you can write off your interest on a mortage”, I have to educate them on a few facts.
As a renter one does not pay property tax. So say a 300 k home and aprox 3500 in property tax.
Say a household income of 75k, three kids and a federal tax liability of ~ 3500. If the renter buys a home he gets to write off about 20k a year in interest (depending on the size of the mortgage, interest rate etc). Which might bring his fed tax liability down to close to 0. But he has to pay property tax now, so he is back where he started at a 3,500$ tax laibility, just now it is in the form of property tax.
Also, don’t forget about the 10k standard decuction given to the renter. In this scenario there would only be an additional 10k write off.
everyone’s tax situation is different. You have to actually owe taxes before you can save on them via write offs.
I just hate relators just flippently quoteing how much money you can be saving by writing off a mortgage. Talk to a CPA first and work out the math. Buying and house (and a mortgage) is not always the tax savings it appears.
