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Improve Youre Bottom Line
by Natasha Lovas
Senior Loan Consultant
Triton Funding Group
Most women know that there are tax advantages to owning real estate, but few know how to maximize these benefits to improve their own bottom line. I’m going to walk you through a process you can implement to translate those write-offs into money in your pocket.
First, what are the tax advantages you realize by owning property? The interest on your mortgage or mortgages is deductible. That’s true whether it’s your primary residence or a second home and you can take the deduction as long as your mortgages total less than a million dollars. Property taxes paid during the calendar year are also deductible. These tax advantages are considerable and can boost up that bottom line, and you don’t need to wait until your taxes are filed, to enjoy the benefits of owning real estate. You can begin to benefit now.
Here’s a dollars and cents example. You and your partner are buying a house for $750,000, with 10% down. The first mortgage is $600,000 and the second is $75,000. With a fixed rate loan at 6.25% on the first mortgage, you would pay $ 37,300 in interest that first year. Let’s say the second mortgage is an equity line at 7.5%. You would pay $5,625 in interest on that loan. Add in approximately $8,550 in property taxes, and your total deductions for the year would be $51,475. (Plus any prepaid interest, property taxes and points that you paid in escrow.)
Let’s say your taxable incomes are $75,000 and $50,000. If you didn’t own a home, the person who makes $75,000 would owe $15,514 in federal income taxes1. The person earning $50,000 would owe $9,171 in taxes. That’s a total tax bill of $24,685. With home ownership, the picture changes dramatically. You now have $51,475 of tax deductions to share. Instead of owing taxes of $24,685, you now only owe $12,310. Your tax bill has been cut in half!
To put this savings into your pocket now, do a quick calculation to predict your tax benefits on a monthly basis. Just take your tax deductions of $51,475 times your 25% bracket, which is $12,868, and divide by 12. That’s a little over $1,000 per month that stays right in your pay checks to help meet your monthly obligations. That’s why I suggest to all my clients who are buying their first home, “Run, don’t walk; into your HR department and fill out a new W-4 form as soon as you close escrow on your new house!”
If you’d like to learn more about home ownership, please call or visit my website, natashalovas.com.
Bio & Past Articles
Past Articles
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Betty's List Financing Your Future
Columnist Natasha Lovas.
Natasha Lovas has specialized in residential real estate financing since 1993. She has presented seminars for first-time buyers and shared her expertise with new real estate agents in my "Financing 101" course. Recently, Natasha led a workshop on buying a second home in the Wine Country.
Prior to joining the mortgage industry, she was a civil litigation attorney in San Francisco. Natasha holds a B.A. degree from San Francisco State University in Business Administration with an emphasis in Finance, and a J.D. from Hastings College of the Law in San Francisco. She is a licensed California mortgage broker (license #01161948), and a member of the National Association of Mortgage Brokers (NAMB) and the California Association of Mortgage Brokers.
Natasha worked as a Senior Mortgage Consultant with Pacific Guarantee Mortgage in San Francisco for 12 years. In mid-2005, she joined The Triton Funding Group, working from Triton''s offices both in San Francisco and in Sonoma.
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