Read on Twitter
#LoanOfficers and #Realtors continue to butcher the #TaxSavings conversation regarding having a mortgage. When they do, they usually make it appear bigger than it really is which misleads the buyer.
You might want to bookmark this!
Here is how the calculation really works:
You might want to bookmark this!
Here is how the calculation really works:
The Standard Deduction means you do NOT pay income tax on the first $13,850 earned as a single taxpayer or $27,700 for a married couple.
If your write-offs exceed those limits, you receive an additional tax refund, as your payroll providers do not consider this.
If your write-offs exceed those limits, you receive an additional tax refund, as your payroll providers do not consider this.
An easy way to calculate the mortgage deduction is to deduct the SALT (State and Local Tax) limit of $10k from the standard deduction. SALT is essentially your state income tax and property tax. In high-cost markets, you can assume the $10k will be met with those two fees.
This leaves you with a balance of $3,850 for singles and $17,700 for couples.
Your write-off is all mortgage interest that exceeds those totals. Assuming a $600k loan at 6%, we can use $36k for annual interest as long as you know it decreases YoY slightly as you make payments.
Your write-off is all mortgage interest that exceeds those totals. Assuming a $600k loan at 6%, we can use $36k for annual interest as long as you know it decreases YoY slightly as you make payments.
We then deduct the remaining standard deduction (approx $4k/$18k respectively) from the annual interest total.
In this case, that is $32k/$18k for single/couples.
From here, you need to figure out the top tier tax rate for Federal and State.
In this case, that is $32k/$18k for single/couples.
From here, you need to figure out the top tier tax rate for Federal and State.
I would bookmark this page from #Forbes to easily see the grids.
Single Borrower w/ income @ $125k = 24% Federal
Married @ $175k = 22%
DC Tax Rate = 8.50% for both.
Total Top Tier Tax Rate is 32.5% (Single) / 30.5% (Married)
forbes.com/advisor/taxes/…
Single Borrower w/ income @ $125k = 24% Federal
Married @ $175k = 22%
DC Tax Rate = 8.50% for both.
Total Top Tier Tax Rate is 32.5% (Single) / 30.5% (Married)
forbes.com/advisor/taxes/…
Multiply the interest write-off by the sum of the top tier Fed + State tax rates. This gets you very close to your annual income tax reduction from owning a home.
Single: $10,400 or $867/ month
Married: $5,490 or $457/month
Single: $10,400 or $867/ month
Married: $5,490 or $457/month
For move-up buyers, you can use this same calculation however just net out their current interest from the new interest.
Many of today's #homeowners are NOT getting a mortgage interest deduction. Think of a married couple with a $500k loan at 3%...$15k, <$18k remaining after SD
Many of today's #homeowners are NOT getting a mortgage interest deduction. Think of a married couple with a $500k loan at 3%...$15k, <$18k remaining after SD
One thing to note, you CANNOT write off interest on a loan > $750k. When doing this calculation, if someone borrows $1.0m at 5.5%, the annual interest you use is $750,000 x 5.5%...not that $1.0m!
I hope this helps you advise your clients better! Tax Savings with these high rates is real and should be part of the overall budget discussion...just be sure to not overstate what it really is!
#mortgagetips #realestate #realtors #budgets #housing #Taxes
#mortgagetips #realestate #realtors #budgets #housing #Taxes
• • •
Missing some Tweet in this thread? You can try to
force a refresh
