From: dim@soda.csua.berkeley.edu (D. Gerasimatos)
Newsgroups: misc.invest.real-estate misc.invest.stocks misc.invest misc.consumers.frugal-living misc.consumers.house
Subject: Re: Let me get your opinion
Date: Fri, 17 Oct 2003 02:44:53 +0000 (UTC)
Originator: dim@soda.csua.berkeley.edu (D. Gerasimatos)

In article ,
Charles Quinn  wrote:
>
>I too live in California. Do as I suggest, take your tax returns out for last 
>year, redo the math on them without your mortgage interest deduction. You will 
>find out you are paying thousands for a few hundred dollars difference in your 
>taxes.  Now take how much you would pay without a mortgage interest 
>deduction and compare that with the deducted one plus the interest you 
>paid. You are not saving as much as you think, actually you are paying more 
>than you think.


I've done this little exercise. For me, buying a property saved me
thousands of dollars each year, not hundreds. Yes, I am paying a lot of
money in interest, too. What is your point here?


*My* point was that once you start itemizing you can take advantage of
a lot of tax deductions that you never could before, not just the
mortgage interest deduction. In my case, those other "little" deductions
add up to about the standard deduction (give or take). That means the
mortgage interest deduction is substantial.


Without the mortgage I would pay thousands more in taxes each year. Yes,
I would also save thousands in interest, but that money would just be
going to rent anyway. 


How much you "save" depends upon how large your outstanding mortgage is
and which marginal tax bracket you are in. For a lot of people (especially
in expensive places like CA) the tax savings are substantial.


I would never advocate keeping a loan only to deduct the interest, but
your claim that "You are not saving as much as you think, actually you are
paying more than you think." cannot be substantiated. If my house was
paid for I'd be paying the same amount of property tax and yet receive no
deduction (or very little) for that, in my particular case.


Dimitri