Doubtful Deduction

mortgage interest 1 The median priced home is $220,000. Assuming 10% down and thus a $198,000 mortgage, at the current 30-year mortgage rate of 3.7%, that works out to a payment of $917/month. Add $180/month for property taxes and the total is $1,097/month – an annual total just $564 higher than the 2015 standard marital deduction of $12,600! Meaning the mortgage interest deduction is virtually worthless to a family buying a median priced home.

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  1. Good point but I think it’s worse than that. Even in the first year when the interest portion of the payment is highest, roughly $3,600 goes toward principal, which isn’t deductible. The deductible portion of the payment is actually about $3,000 less than the standard deduction in the first year, and declines in successive years.

  2. Stu Welkovich says:

    While I agree with your basic premise, the above scenario opens the door to other tax deductions that would otherwise be lost; mainly state and local income taxes paid and charitable contributions. So while the mortgage interest and real estate tax deduction may be virtually worthless, there is (often) an untapped benefit to having it.

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