Property Tax Deduction Federal Taxes
May 21st, 2009
Question: New home owners and Tax Deductions?
Hi:
My wife and I are ready to purchase our first home, but the tax implications aren’t clear to me yet. I know both mortgage interest and real estate taxes are tax deductible, but that I have to itemize on my 1040. The only real way to lower monthly payments is to change the number of exemptions with my employer to reduce the amount of tax taking out. I also read that every exemption equals to app $3,400 of tax reduction.
Now, let’s say I estimate to pay annually $20,000 in interest, $13,000 in property taxes and my federal taxes are 28%/state 8%, how much of a tax refund can I expect and what should I change my exemptions to in order to get the optimal monthly refund back?
I realize that eventually I have to talk to an accountant, but I’m trying to figure out how much realistically this house will cost me a month. My goal is to lower my monthly payments as much as possible.
Thanks!
Yes, this is NJ: so high taxes and (still) high house prices!
Answer: Here’s a good rule of thumb to use… For every dollar you spend in a traditional 30 year fixed rate mortgage and property tax, you get back about 30 cents on income tax (i.e., about 30% – or, about 1/3).
Also, the thing about each exemption being worth $3400 of tax reduction… that’s not really accurate. Basically, it varies depending on income. Taking 3 exemptions for someone earning 100K/year is not the same as someone taking 3 exemptions making $20K/year.
There you go!
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Urban Affairs: County considering shuttle as commute option; deadline today for early deduction on tax bill.
Urban Affairs: County considering shuttle as commute option; deadline today for early deduction on tax bill.
Tax Deduction Tips & Advice : How to Take Federal Income Tax Deductions
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