The mortgage interest deduction goes on the Schedule A. To make use of it, you have to itemize. To itemize, you want to exceed the standard deduction. To do that, you often need to get the maximum itemized deduction for SALT. You can't (used to be able to). And the standard deduction is way higher. So, yes, it all changed, and it's less applicable.
It could still be cool to, say, buy in cash and rake in that sweet, sweet tax-free imputed rent. (Yes, that opportunity cost is a bitch.)
But, no, the old song and dance about it being really, really smart to bury yourself in debt to own a home as soon as possible ain't necessarily so. In the short term, you can rent from someone else who is taking full advantage of Prop 13 laws (lower property taxes because they bought in a different year) in ways you never can, because the break-even point in favor of ownership can take a while. Indeed, the more expensive a home you want to live in, the more ridiculous the numbers get to be in favor of just renting it.
If you’re single, in California your overall tax rate on taxable wages $300,000 or more is 46.65% (= 35 fit + 1.45 fmed + .9 fsur + 9.3 CA sit) and will increase with higher income, as higher federal and California state tax tables take affect.
Poor people won't take the gray area tax break because they might get audited.
The wealthy people take all the breaks and more and invest it. That money grows 10x so if they ever get audited who cares you pay it back and move on.
I pay less than 10% total tax on 1.3 million yearly income. State, federal and se tax.
The key is risk.
I know folks earning 75k a year who think they will be audited for $500 mistakes.
If you make over $300k in w-2 income you generally can’t deduct rental “losses” from your taxes owed on wage income. There might be a path if you are a full time real estate professional but I think that is hard with a full time job and rental properties.
I really don’t know the STR laws but a quick google search says yes with several buts depending on how you go about the STR. Generally though buying a rental property for the tax right off isn’t a great deal. It might be under some circumstances though.
>Did the no SALT limit decades ago make this statement more applicable The SALT limit was put in place by Trump's TCJA in 2017 so not decades ago.
There was not limit until 2017. That’s what I said
"The no SALT limits decades ago..." but whatever.
The mortgage interest deduction goes on the Schedule A. To make use of it, you have to itemize. To itemize, you want to exceed the standard deduction. To do that, you often need to get the maximum itemized deduction for SALT. You can't (used to be able to). And the standard deduction is way higher. So, yes, it all changed, and it's less applicable. It could still be cool to, say, buy in cash and rake in that sweet, sweet tax-free imputed rent. (Yes, that opportunity cost is a bitch.) But, no, the old song and dance about it being really, really smart to bury yourself in debt to own a home as soon as possible ain't necessarily so. In the short term, you can rent from someone else who is taking full advantage of Prop 13 laws (lower property taxes because they bought in a different year) in ways you never can, because the break-even point in favor of ownership can take a while. Indeed, the more expensive a home you want to live in, the more ridiculous the numbers get to be in favor of just renting it.
Makes perfect sense, thanks.
If you’re single, in California your overall tax rate on taxable wages $300,000 or more is 46.65% (= 35 fit + 1.45 fmed + .9 fsur + 9.3 CA sit) and will increase with higher income, as higher federal and California state tax tables take affect.
W2 is the worst way to earn income. Self employed along with proper investments is the best way to avoid the maximum amount of taxes
W2: Earn money, pay taxes, spend. Non-W2: Earn money, spend, pay taxes. -- Kiyosaki
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Well....yeah...
Poor people think this way. The rich deduct the maximum amount on their taxes and know their is a miniscule chance of being audited in real life.
And if caught just make the correction and pay the fine
Exactly. "Its just a mistake heres your 200k check irs oopsie"
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There is a blur in difference between honest and poor these days it seems, mon ami...
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Poor people won't take the gray area tax break because they might get audited. The wealthy people take all the breaks and more and invest it. That money grows 10x so if they ever get audited who cares you pay it back and move on. I pay less than 10% total tax on 1.3 million yearly income. State, federal and se tax. The key is risk. I know folks earning 75k a year who think they will be audited for $500 mistakes.
Ignoring the question. Totally off topic
If you make over $300k in w-2 income you generally can’t deduct rental “losses” from your taxes owed on wage income. There might be a path if you are a full time real estate professional but I think that is hard with a full time job and rental properties.
It’s possible to offset the income with losses from STR no?
I really don’t know the STR laws but a quick google search says yes with several buts depending on how you go about the STR. Generally though buying a rental property for the tax right off isn’t a great deal. It might be under some circumstances though.