Determining best price to spend on house (tax-wise)? (income tax, mortgage, mortgage)

[NatasNJ]

I was wondering as I look to buy a house in the near future if there is some ideal magic number where the tax write offs of a house is ideal and the more you spend or less you spend over that number (probably some range) will probably not be as good?

For example. Lets say you take a couple making $100k/yr. Lets assume 20% down payment and currently renting and hence having to tax standard deduction. (11k now?) Current Rent say $1400/m.

If they buy a $300k house (in NJ) their monthly write off $15k/yr for mortgage and say $8k/yr taxes. Then factor in other write offs such as state income tax & charity, you can get your deductions up to $28k. Which gives you $17k above the Standard Deduction.
At a 25% tax rate you are looking at saving about $350/m right?

Does that all seem right? Now if you spend $250k or say $350k on a house. Your extra monthly savings will go up or down a bit but I am not sure where/how to gauge if one of those spots makes more sense than the other?

Obviously the less money you spend on a house the better. But just trying to determine if from a tax aspect there is some spot where it makes the most sense $ wise.

[elflord1973]

Originally Posted by NatasNJ

If they buy a $300k house (in NJ) their monthly write off $15k/yr for mortgage and say $8k/yr taxes. Then factor in other write offs such as state income tax & charity, you can get your deductions up to $28k. Which gives you $17k above the Standard Deduction.

That doesn't look right to me -- does writing off property tax depend on whether or not you take the standard deduction ?

[aneftp]

It gets very complicated when you itemize deductions.

1. If you live in a high property tax/high state income tax state like New Jersery, Maryland, DC, California, you may get hit with the AMT (alt min. tax). It's basically a tax on the middle class. I've seen people making as little as $80K family of 5 get hit with the AMT in New Jersey.

You know how much property taxes you get to deduct when you get hit when the AMT? Zero (0). That's right, if you pay say 4-6K in property taxes, you cannot write that off.

2. Depending on your income level, deductions may be limited after a certain income level (IE... you don't get to write off 28 cents/33 cents/35 cents on the dollar). That deduction amount is actually a lot less than you think.

So, purchase a home that you can afford and live in. Don't purchase a home just to maximize your deductions. Things change. You may add a kid. You may add another deductible expense etc.

[NatasNJ]

Originally Posted by elflord1973

That doesn't look right to me -- does writing off property tax depend on whether or not you take the standard deduction ?

By default you get a standard deduction. If you itemize then you have to be able to make your itemized deduction BEAT the standard deduction otherwise there is no point to itemize. (that I know of)
So if your itemized deductions are equal or less than the standard deduction you might as well save the effort/time and take that over itemizing.

So the first 11k (stan ded) is a wash whether you itemize or not. After that you get a tax benefit to write off.


I can afford $250k or $300k. No real difference to me. I can also afford $350k. So I have that $100k range that I am trying to stay in and I am also looking to make this next house one that works for 5-20+ years. No short term hope type house this go around. So trying to find the right place.