> A $36,000 deduction on $100,000 of taxable income is worth $12,000
> only for those who are married filing separately. Otherwise, the
> marginal rates are 28% for single filers and 25% for everyone else.
C'mon, don't make me do this.
Ok, from TurboTax: $100k W-2, single, no deductions. Federal tax = $19,343 and CA tax = $6,764 ... total = $26,107.
With $28,500 of mortgage interest and $7,500 of property tax, you get: Federal tax = $10,639 and CA Tax = $3,732 ... total = $14,371. Total savings: $11,736. Sue me for the difference, it's 32.6% not 33.3%.
> But remember that the buyer put $115,000 down.
Ah yes. With the 5% ($5,750) interest, your CA tax goes to $7,298 and your federal goes to $20,799 for a total of $28,097 ($13,726 tax savings). Note that you lose 57% of your interest due to phase-outs of the standard deduction. How's that for marginal? Meanwhile, the zero-down looks even better: with $35,700 of interest, your tax goes to $3593 + $8876 = $12,469 ... savings = $15,628.
My point stands: $2k/mo of renting is about equal to $3k/mo of interest and property tax. In Berkeley, this gets you approximately a $575k house or a $2300 rental. Can you find a cheaper house or rental? Yes. Can you monkey with this to get a few hundred dollars each way? Absolutely (hey, my mortgage is 4.75%). Could it add up to "1/3 or 1/4" in any realistic scenarios ...?
NFW.
But thanks for playing,
/jordan