From: doubter 
Newsgroups: misc.consumers.house
Subject: Re: Treat mortgage tax deduction as income?
Date: Tue, 06 Sep 2005 03:25:04 GMT

On 5 Sep 2005 14:23:45 -0700, "Chris"  wrote:

>I'm not a financial genius and am trying to figure out how to calculate
>the effect of the mortgage interest tax deduction on our monthly
>housing expenses.  Does it make sense to treat the deduction as
>additional monthly income (or as reducing the mortgage payment)?
>
>Eg., let's say we have a loan of 324k at 5.5%.  First mortgage payment
>is $1839.  $1485 of that is interest.  At a 28% tax rate, that means
>$415 is the savings on your taxes.  For purposes of calculating what we
>can afford, does it make sense to take that $415 savings for that month
>and either add it to your monthly income or deduct it from the mortgage
>payment (same difference) to calculate money out of pocket for that
>month?  So say I bring home (net) $1600 per month.  With an $1839
>mortgage payment, you'd be in the red $239 for that month.  But
>considering the tax deduction, you are actually 1600 + 415 - 1839 =
>$176 ahead. ??
>
>Thanks for any tips.
>
>-Chris

Hi Chris.  I think you are making it too hard.  Too determine you budget,
you take your gross income and deduct all fixed expenses.  What is left is
your disposable or net income.  

In an ideal world your tax withholding exactly matches your year end
obligations.  So you will adjust your payroll deductions to approximate
your final tax obligation.  This reduces your fixed deductions and will
increase your net income.  

If you are cutting things that close, be sure to slightly under estimate
the monthly tax savings and allow for overpayment of any impound accounts
(monthly prepayment of property taxes and insurance.)  Also be sure to
estimate ALL the costs of home ownership, including a reserve for medium to
major repairs.