Looking for some input on evaluating the potential tax benefits of owning compared to renting in CA.
It looks like in CA homeowners can deduct interest from both federal and state? If so, awesome!
DINKs, ~240K gross, itemized taxes in 2016
Currently renting a 1bed/1bath 'luxury' unit for $2100/mo.
1st child due in Sept
Average 1bed/1bath in this area are ~$1800, the extra ~$300/mo was worth it to us (new construction, gym, classes etc)
Commutes are 1 mile and 10 miles, no traffic, great area, great schools.
Yes - we could move further away to save on rent ($1500 for 1bed/1bath) but this would add considerably to our commutes and bring traffic into play (>30mins each).
We both plan to continue to work after the baby arrives, but do not want to over-commit to a massive monthly housing payment should our plans change. Hoping to make the numbers work with only 1 working adult.
Given the child on the way, we are looking to move to a slightly larger space (to allow visitors, baby room etc).
Rent 2bed/2bath, 1mile/10mile commute (no traffic), $2300/mo
(no tax benefits)
Rent (luxury) 2bed/2bath, 1mile/10mile commute (no traffic), $2700/mo
(no tax benefits)
Buy 3bed/2bath home ($800k), 10mile/20mile commute (no traffic), $4000/mo
P&I = $3000/mo [$2075interest/$925principal] - $640,000 mortgage / 4% interest / 30yr fixed
PT = $700/mo (property tax)
HOA/Insurance = $300/mo
$2075MI + $700RET = $2775/mo tax deduction
~30% federal tax + ~9.3% state tax = ~39.3 tax
$33000*0.393 = $12969/12 = $1080 tax savings / mo.
$4000 - $1080 = $2920/mo effective monthly housing cost.
+ adding ~$900/mo in principal...
Option 1: $2300/mo
Option 2: $2700/mo
Option 3: $2920/mo (+$900/mo principal - $maintenance)
Obviously we are leaning towards option #3.. :)
Does the above seem correct?
What would you do in our situation (or what have you done?) ?