Mortgage Interest vs Payroll Taxes Deduction

[NPH]

Totally gross annual payroll income for my family (2 people) is $80K. If I purchase a house for $500,000, how much can I save from my payroll taxes?

Total annual property taxes are $6,250.

Total annual rent is $12,000

Please let me know if you need more info.

[JohnH]

Maybe I'm misunderstanding your facts

I'd like to know a couple of things, just out of curiosity:

1) Who would lend you $500,000 against an annual income of $80K? The interest payments alone will be in the range of $35K, not counting principal, taxes, & insurance..

2) Assuming this scenario is correct, after you pay the PITI, utilities, and a few other basics, how are you going to buy food?

[JAinNC]

If you are comparing rent to buying

just do a spreadsheet of each way and include all expenses on a monthly basis. You just have to do a cash flow to see in the figures in front of you.

[NPH]

Only one question:

How much can I save annually from Federal payroll income taxes?

Save from Federal Income Taxes minus save from mortgage interest

[JohnH]

Rough approximation

If you take into account that you are already entitled to a standard deduction of $11K and personal exemptions of $7K, then at the income level you stated, the net tax benefit of most of the mortgage interest & property taxes paid will only be about 15% of the amount you pay out (a tiny bit of it reduces your taxes at the 25% bracket, but you quickly drop into the 15% category). So if you paid $33K in mortgage interest & property taxes, your true net tax savings would be about $5K.

However, I don't think you need to worry too much about this if your figures are real, because lenders also know how to do this math.

[dsi]

NPH,

Who are you? Are you a professional tax preparer?

[S T]

More Info would be required

NPH

If your are preparing your own taxes and doing your own calculations, then you would need to look at some of the prior posts for your answer.

If you have a tax professional that prepares your taxes, then you should be able to contact them and recevie the needed information.

Keep in mind that most of us that are tax professionals, pay for continuing education to keep current on the regulatory procedures, pay for multitude of software programs to prepare tax returns and prepare tax projections. This is our business!

For me as a professional to calculate withholdings from payroll and possible tax savings due to mortgage interest and property taxes, I would need a lot more information than you have offered.

A partial list to start with would be:

1. Copy of the prior year tax return
2. Filing status including dependents and their birthdates, is there childcare expense
3. Copies of the most current paystubs which would provide year to date wages, withholding, etc.
4. Projection of other income
5. Projection purchase price of home, and amortization for principle and interest payments. Loan amount, % rate, term, etc.

That all might be a really good start to see if your payroll withholdings could be adjusted to compensate for the increase of mortgage payment over a current rent payment.

This would be my due diligence before I would be able to provide you with an anticpated reduction in withholdings from payroll taxes!

How much does this cost, I charge my clients somewhere between $75 - $125 depending on the complexity of the calculation, and then will offer 25% of these fees as a discount if they return to have me prepare their tax return.

Sandy