Income tax and the Mortgage Interest Deduction.

sgip

sgip

Well-known member
Here we are on tax day and a question came to mind.

With the Fed extending HARP to 2015 and refusing to lift their monthly bond buying, word on the street is that we may see a sub 3% handle on the 30 fixed. The recovery does not appear to have legs most current indicators.  Already today you can obtain an FHA loan at 2.875% for nearly zero points.

If we do see a sub 3.0% 30 fixed is the Mortgage Interest Deduction even worth taking? At what point is the MID worthless? I know there are 2.50% or lower ARM rates. What does that do to a persons deductions?

Discuss
 
Soylent Green Is People said:
Here we are on tax day and a question came to mind.

With the Fed extending HARP to 2015 and refusing to lift their monthly bond buying, word on the street is that we may see a sub 3% handle on the 30 fixed. The recovery does not appear to have legs most current indicators.  Already today you can obtain an FHA loan at 2.875% for nearly zero points.

If we do see a sub 3.0% 30 fixed is the Mortgage Interest Deduction even worth taking? At what point is the MID worthless? I know there are 2.50% or lower ARM rates. What does that do to a persons deductions?

Discuss
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It's worth taking for me!  Especially since lenders front load interest payments, the MID is still very useful for high value area like Orange County.

Aside, the FHA loans have super low interest but the MIPs are much higher now right?
 
I think any type of mortgage deduction is worth taking... even at 3%, if you have a high loan balance (over $417k) that's quite a chunk.

The standard deduction is $11,900 (married filing jointly) so 3% on a $417k loan, that's about $12,400 and will save you some tax money.
 
Soylent Green Is People said:
word on the street is that we may see a sub 3% handle on the 30 fixed.
Click to expand...

I keep getting fixated on this part. Really? If it happens and is more than a flash in the pan, call me.  :)
 
Yes the FHA MIP is 1.35 to as much as 1.55%. Yikes!

A $300,000 loan at 2.75% (5/1 ARM) is $8,250, If someone has a lower loan amount the MID diminishes considerably.
 
with property taxes it is still higher than standard deduction.

irvinehomeowner said:
I think any type of mortgage deduction is worth taking... even at 3%, if you have a high loan balance (over $417k) that's quite a chunk.

The standard deduction is $11,900 (married filing jointly) so 3% on a $417k loan, that's about $12,400 and will save you some tax money.
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most peoples CA taxes are higher than than the standard deduction which allows you to deduct the interest and property taxes at whatever marginal rate the taxpayer is at (assuming he has enough income in that particular marginal rate to absorb the deductions).
 
Soylent Green Is People said:
A $300,000 loan at 2.75% (5/1 ARM) is $8,250, If someone has a lower loan amount the MID diminishes considerably.
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There are $300k loans at today's prices in Irvine?

Isn't everyone in Jumbo or all-cash? Heh.

But even with a low MID, there are other deductions that will put you over $11,900. Even with a $300k loan, if we assume you put down 20%, a $375k house (again, unheard of in Irvine) will still be about $3750 in property tax which puts you at $12k (and then all your other deductions).

I guess in Riverside, the MID becomes less useful (ooooo.... been a long time since I've done an IE burn!).
 
LAtoOC said:
I thought if you hit AMT property tax deductions vanished.
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It gets phased out once you start going above a certain income level (this level will vary by taxpayer as AMT has a lot of parts to it).
 
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