Mortgage Deductiion Tax Efficiency

I'll admit it, I was taken in by the notion that buying a house was more tax efficient than renting. Everybody knows about the mortgage tax deduction, real estate agents positively shine when they talk to first-time home buyers about the savings. But I figure it's a pretty big decision to make based on rumors, so I sat down and worked the math on the mortgage tax break. In my case, and in the case of about half of American homeowners, it's not worth a dime. In the case of those homeowners who do take the the mortgage tax deduction, I'll bet the savings comes to less than the property tax for most of them.

The problem is two-fold. First of all, taking the mortgage tax deduction requires itemizing versus taking the standard deduction. If your itemized deductions on Schedule A come to less than the standard deduction for your filing status, there's no point in itemizing, you'd be throwing money away. Second, if you aren't already paying a lot of taxes and a whole lot of mortgage interest, the savings won't amount to much. It's a great deal for wealthy people who keep upgrading to more expensive homes, especially if they buy them in elderly areas with small school systems and low property taxes:-)

Check out the math if you're curious, but the bottom line is that the average American won't save beans on their taxes by purchasing a house with a mortgage. I went to the bother of figuring it out because I'm trying to talk myself into buying a house. It didn't help. I'm really focused on finding a rental at this point, and I'm spoiled by renting furnished. I'm beginning to see some furnished off-season vacation rentals showing up on craigslist, lake front properties in New Hampshire that the owners are trying to rent from September through May. The time frame sort of works for me, but many vacation properties are built without garages. Also, I'm not sure about the building codes in New Hampshire, I don't know that they are required to do energy audits, so some of these places may be near impossible to heat in the winter. I did see one that included heat, and I think I'll drop them a line.