2018 Tax Deductions

Amazon
Shimmer

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Microsoft
Shimmer
Aug 5, 2018 11 Comments

Hello Blind,

May I get a sanity check in what my mortgage interest and property tax deduction will be for 2018 for my first home purchase estimate?

Standard Deduction for single filers under new tax law: 12K annual

If I pay 12K in property tax annually, I can write off 10K under the new law’s cap: 10K annual

Let’s say my mortgage interest per month is 3K and I’m in the 33% tax bracket, so I can deduct interest * tax bracket: 12K annual.

I should therefore take the itemized deduction at (10K + 12K) = 22K instead of the 12K standard.

Does this look right? I feel like the 10K gap is huge so I’m doing this incorrectly. That’s like 300K in savings over 30 years!?

TC: 203K, Bay Area

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TOP 11 Comments
  • You don’t deduct at the tax bracket, you deduct the full amount which impacts your taxable income which is then taxed according to brackets. So if you’re itemizing deductions, you’d have 10k of property taxes and 36k of mortgage interest. So you decrease your taxable income by 46k (or more if you have charitable donations or other deductions). Then you reduce your tax accordingly. If you were 46k into the 32% tax bracket (income of 246k or more as a single filer) then you would pay ~15k less in tax after your deductions. Without the mortgage, you’d use your standard deduction (12k) and would reduce your taxable income by 12k which would reduce your tax liability owed by 32% of 12k = ~4k. So yes you’re getting roughly 11k of tax savings each year for having the mortgage according to those calculations.

    By the way that’s a lot of interest. Are you sure you’re paying $3000 a month in interest? If so you may also run up against the $750000 mortgage limit for deductibility of interest. So you may not be able to deduct that all either.
    Aug 5, 2018 2
    • Amazon
      Shimmer

      Go to company page Amazon

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      Microsoft
      Shimmer
      OP
      You’re awesome. Yeah let me revisit these estimates. That amount is about right though.
      Aug 5, 2018
    • Thanks :) Also if TC is really $203k, and you contribute to 401(k) let’s say max, then that also decreases your taxable income. So your taxable income today, before deductions, may be below $200k. If so, then you’d be in the 24% tax bracket. So your tax savings would be 75% of what I said before, and you’d be getting roughly 7-8k of tax savings when compared to the standard deduction. Probably nothing game changing though, I assume.
      Aug 6, 2018
  • Amazon
    someone007

    Go to company page Amazon

    someone007
    To my understanding you get to deduct anything above the 12K standard deduction. If your property taxes are 14K, you can deduct 12K of standard + the difference of 2K for a total of 14K.
    Aug 5, 2018 3
  • New
    Broker

    New

    Broker
    $750,000 cap are on mortgages originating in 2018 and later.
    Aug 5, 2018 1
    • True. I assumed it was originating in 2018 since there was talk about first time homebuyer estimates, but you’re right. It wasn’t necessarily clear. If your mortgage originated before 2018, you’ll be grandfathered in at the old limit, which was $1 million of mortgage debt.
      Aug 6, 2018
  • Use TurboTax or whatever. It will tell you to put in all the info and then it will tell you whether you should do itemized or standard.
    Aug 5, 2018 0
  • Amazon / Eng
    kkdou❤️me

    Go to company page Amazon Eng

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    Sabre Corporation
    kkdou❤️me
    If you have mortgage, standard deduction doesn't make any sense. Since we are atleast 5 months away before the tax season gets crazy, many CPAs will offer to review your tax options.

    I am sure turbo tax does this automatically for you
    Aug 5, 2018 0