As a Calif resident earning $79,000 with 3 deductions, what kind of tax savings would I get from a $500K home?
Single tax filer in San Francisco; first-time buyer; assume 10 percent down and competitive mortgage interest-rate loan at today's rates. Also, would condo association fees be deductable?
- JudyLv 71 decade agoFavorite Answer
Your mortgage interest and real estate taxes would be deductible, but not your condo fees.
You're probably in a 25% bracket, so you'd save about 1/4 of what you pay for deductible expenses in taxes. You might save somewhere around $10,000 - 15,000 a year for the initial years while your payment is still mostly interest. This is a very broad estimate, since I had to guess on what taxes would be and also what mortgage rate you might get, since 10% isn't a very strong down payment on a 500K house.
- 1 decade ago
You would be saving approximately $3000 in federal tax and $1000 in calif. state tax per year. Meanwhile your mortgage, taxes and insurance would run about $3000 per month. If you currently rent a place for $3000 per month, this might make sense. However, you will have about $2200 a month in net
cash available to spend on food, utilities and everything else.
If you do not believe my estimates, calculate your taxes both ways - exactly - and you will see. Roughly you will be going from 59k in taxable income to 36K (also you will have to pay Social security on all of the 79k.)
My advise is to pay as little rent as possible, lower your taxes by saving the max in a 401k plan or IRA, and save for more cash for the down payment.