Mortgage interest doesn’t fall under the SALT cap. You can deduct up to $10k on the SALT line, which every middle class homeowner family in a reasonably taxed state will hit. The mortgage interest line is capped by the amount of the loan at $750k. So the deduction amount is theoretically unlimited, but if you’re “capping” you’re paying at least $20k/year in interest even if you refinanced at rock bottom rates.
So it’s a cap that only affects the very rich, but if you’re hitting it you’re going to itemize. New mortgages post-interest rate normalization are going to want to itemize well below the cap. I’ll revise my numbers down to ~100% on that cap alone and even lower for homeowners in general but that’s because I forgot how hard the tax changes hit married couples. Single homeowners will itemize much more easily. Also consider:
It’s not this simple because you need to consider the impact on state taxes, which can be significant. It’s why there’s a box you can check on your federal return acknowledging that your itemized deductions are below the standard deduction but you’re choosing to itemize anyway. And your numbers are for married couples. If you’re single and maxing SALT you only need to make up $3850 in mortgage interest. Big difference!
Also I’m aware that we’re talking about marginal benefits here. If you own a home and you’re trying to figure out if it’s worth itemizing I’m saying there’s a good chance the answer is still yes, even if you’re married. Wanting to buy a home for the tax benefits is a different story. We’re talking a few hundred dollars in benefits over the standard deduction in most cases. In general I’m more aligned with Melkerson in the thought that renting can be a better financial decision (and is almost certainly superior today).
I’m pretty sure this is not correct. The $750k applies to your average loan balance throughout the year. It doesn’t matter how much the original loan was. If you were under $750k remaining all year you’re uncapped. If you dropped below $750k during the year you still might be uncapped after you find the average, and in either case you’ll be uncapped next year.
You are right, it isn’t using the original amount. The number looked similar to the original amount, but it was my Jan 1 balance.
The form 1098 has in box 2 “Outstanding mortgage principal as of 1/1/2023”. That is 868k, and Turbo Tax is letting me deduct 750/868 * interest paid in 2023. The average is well below 750. Let me know if you think Turbo Tax is wrong (I’m sure they have issues).
I looked up the form and I think Turbo Tax is doing it wrong. They are just using the Jan 1 balance and they should be using the average. I was surprised the average is still over 750k but regardless they are short 1200 in their calculation.
I think it’s the opposite, TT is under-crediting by using the balance from the start of the year (which is higher, and more over the cap leading to a smaller credit).
TT is doing it wrong, has been doing it wrong for some years, and nobody cares. Most of the people who notice sell and buy a home in the same year and then TT gets it very obviously wrong.
The way they do it will always cost the taxpayer money, never win.
I fixed it by changing line 2 from Jan 1 balance to the average balance. This input doesn’t get filed, it just causes TT to calculate correctly.
I think Krayz is right about this. If it’s using your balance at the beginning of the year, that’s going to be higher than your average balance, which will result in a higher deduction than you’re actually entitled to. If TT does this you could try filing as is and if the IRS catches it you have a great excuse to avoid criminal tax fraud. And if they don’t, free money. Sounds like it doesn’t matter this year but next year it would.
On the one hand, it’s good to know you didn’t miss an obscure tax law when buying your house that will cost you for the remainder of the mortgage. And missing tax breaks due to arbitrary caps isn’t fun psychologically. But on the other hand when you get under the cap your deduction gets lower.
Dayton would be about an hour away from a poker room. Austin is a place we discussed, but the lack of reproductive rights and potential other crazy Republican shit is a non-starter for us, at least long term.
Long term we want to be somewhere I can play at least 5/T and preferably T/20. If the requirement was just 2/5, we could probably find a place. It’s possible that we could actually have a better standard of living in some low cost of living place with me playing 2/5 than in other places at 5/T… But T/20 should be a game I make enough more to offset it.
The best combo of cost of living and 2/5 is probably Biloxi, but obviously we’re not looking to live in Mississippi.
Foxwoods is pretty dead I think, and I’m not sure about Turning Stone but I’ve heard it’s just a 1/3 room mostly. I want to make a trip there during a WSOP Circuit and swing over to Syracuse, but not sure it’ll happen.
Maybe I’m misunderstanding something but it sounds like the balance you give TT only matters for the purpose of figuring out if you’re over the limit or not, no? High balance is bad, if your balance is <$750k you get to deduct all the mortgage interest you paid and if it’s >$750k you can only claim (750k / your balance) percent of the interest.
I get that living in a place without reproductive rights feels dirty, but the stark reality is you aren’t that different from the rich republican legislator who will fly his daughter out of state for an abortion.
If your wife needed one, the two of you could make it happen. It’s not riskless as there could be some emergent care situation. And likely access to care will be poorer in general with docs leaving these places, but it seems like something you might want to consider compromising on if everything else fits. Yeah, I realize this is a pretty morbid suggestion, but something you probably ought not to completely dismiss, as uncomfortable as it may be.
I think I see what you’re saying. The interest paid is reported on your 1098, so if you’re below the cap it’s an easy transcription and you’re done. If you’re above the cap you’re using the formula you provided. [Interest Paid]*(750k/[Avg Bal]) should work out to interest paid on the first 750k of the mortgage, since [Interest Paid]=[Avg Bal][Interest Rate], so the formula simplifies to 750k*[Interest Rate]. I was doing that math in my head thinking reporting a higher balance could only help increase the value of interest paid you’re arriving at. But the interest paid number will still be as reported, and the average balance you’re using only acts as a denominator. My head hurts now too but you’ve convinced me and this would explain why the IRS has never put a stop to TT users overstating their loan balances.
The SALT Cap is $10k. The standard deduction for Married filing jointly is 27k. That means that in order for itemizing to make sense you have to be paying greater than $17k in mortgage interest. The majority of people (myself included) are not paying more than $17k a year in mortgage interest.
Chicago is in the mix, in part because the casino already being outside the city leaves options to go like 30-40 minutes from there and find affordable housing.
My experience and understanding is that the games in Vegas aren’t very good. Cost of living there isn’t bad, but we both hate the weather there too.
Yeah, but it’s brutal and we’re hoping to significantly reduce both of our commutes if possible.
Yeah she’s not comfortable with it, and I don’t blame her. It probably only removes one of our realistic options for T/20+ locations, so long term it’s not a huge deal.
I thought we were talking about people who are capping the mortgage interest deduction. They are almost all paying more than $17k/year in mortgage interest.
Someone buying a house right now will almost certainly be paying more than $17k/year in mortgage interest.
As discussed, the numbers change considerably for single homeowners.
Not really discussed but previously mentioned, state taxes can have a significant effect. As an example, married homeowners in Maryland with $150k joint income should take itemized deductions if they can claim $21715. They’ll be increasing their federal taxable income by $6k but decreasing their state taxable income by $16.5k.
Sounds like the plan is to run on abortion. Looks like the same play call as student loan forgiveness to me. He’s going to make them kill it in the court and further contrast themselves on an issue that polls 70-30 the wrong way.
