Mortgage Interest and Property Tax Savings Calculation

[Tezz24]

Is there a good rule of thumb out there to estimate your tax savings on your home? This would be for a large value home and currently in a high tax bracket (~30-35%)

For instance, if your mortgage is > 750,000, and your property taxes are > than 12,000, is there just a single number you can expect to save in taxes? Or at least a good estimate?

Thanks

[wenchsenior]

I've never heard of any rule of thumb.  I think you just have to run your numbers, keeping in mind that the new tax law has just dramatically changed the likelihood of itemizing for many people.

So, if you ARE itemizing, and you take out a 600K 30 year mortgage (750K - 20% down), at about 4.something % rate, then your interest will run approx 20-25K per year for the first few years, plus e.g. 12K prop tax  = ~35K deductible x .30 tax bracket = ~10.5K saved on taxes.

Someone will surely be along to correct my numbers if they are wrong.

[boarder42]

your property taxes no longer will save you more than 10k - and if you're in a home of that size you're likely paying income tax at a state level too and the sum of both of those over 10k is worthless in the new tax code

So if you pay state income tax now at 10k or more your property taxes save you nothing.

if the math above is correct fot the mortgage with interest at 20k you're only saving 6k more than the standard deduction of 24k when you sum up your 10k in (property + state income) and 20k in mortgage interest. 

so 6k*30% is 1800 bucks a year in taxes.

either way take the total mortgage interest paid plus 10k and subtract 24k from it and your tax savings will be whatever your marginal rate is times that - due to your house

which as you can see isnt really worth much anymore on an insanely expensive house with a huge income.

this tax code basically targetted people in this situation and made them possibly pay more money - those with large deductions related to their house property taxes and state and local income taxes. 

[SeattleCPA]

The new mortgage interest deduction rules are perhaps a bit more complicated than you realize. Even if your mortgage is over $750K, for example, you probably will be able to deduct interest:

https://evergreensmallbusiness.com/new-mortgage-interest-deduction-rules/

The reason is your loan will probably be grandfathered in...

[boarder42]

The new mortgage interest deduction rules are perhaps a bit more complicated than you realize. Even if your mortgage is over $750K, for example, you probably will be able to deduct interest:

https://evergreensmallbusiness.com/new-mortgage-interest-deduction-rules/

The reason is your loan will probably be grandfathered in...

the math i did above still applies and makes it not worth a whole lot anymore. previously many could say all of their mortgage and property taxes were deductible and justify a larger more expensive house purchase - since its not unfathomable to have 12600 dollars in state income taxes paid.  but with the changes it makes it mostly useless even on a mortgage of the OP's size. due to SALT cap at 10K - one could even have made the case with old rates that the house purchase was actually helpful towards achieving FI if bought appropriately and sold for a smaller house post FI. now it get much tougher to make that math make sense.