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Question

I am making around $100,000/year and want to buy a house around $ 300,000 what is the best to pay as down payment to lower my payment and also get benefit of tax bracket change.

Answer 1

I agree with bostonianinmo with one possible exception. The highest Federal tax rate is currently 35%, but AMT probably reduces the benefit of the deduction in that bracket. Even at 35%, you pay the mortgage company $1.00 to save $0.35 in taxes. If you want to give someone $1.00 to save $0.35 in tax, I recommend any charity. Or you could send me the dollar and I'll send $0.35 back. Property taxes are still deductible with or without a mortgage.

EDIT: Peggy K is forgetting that deductions REDUCE taxable income. That MAY move you from one marginal rate to another. bostonianinmo never claimed a bracket change was guaranteed.

Answer 2

Sorry, buddy. There's no tax bracket change when a person buys a house. There are some expenses associated with home ownership that may be deducted from your income, and that may lower your taxable income... but there aren't any guarantees in this life and you need to know this up front.

Keep all receipts and records from the purchase of any home you decide to buy, including property or real estate and school taxes paid on the place, and any points paid and home mortgage interest paid. Whether or not it will be beneficial to you to use these expenses as deductions is something that will have to be examined whenever you fill out your tax return for the year these expenses were paid.

That's the name of that tune.

Answer 3

Don't depend upon this for a tax bracket change; it's not likely to happen. Pay down as much as you can afford, 20%or more, to avoid PMI and keep your total interest costs as low as possible. At best you'd be looking at a bracket shift from 28% to 25%. That's no great shakes...

Don't choose a loan based upon the deductibility of the interest. That's a fools mission since at best you'll get 28 cents in benefit for every dollar paid in interest, leaving you 72 cents poorer for each dollar paid.

Answer 4

I would pay as much down as you can comfortably afford, without affecting future purchases for your house. Of course the less you borrow the less you owe, so I have had great success paying down mine by paying a minimum of 100 and as much as I can afford especially not at tax time. We put all to the house as the interest/prinicipal porportion is about 10 years ahead of the amortization schedule and this is only our 6th year!! I hope to pay the 30 fixed off in a total of 12 to 14 years. Of course there are always other things that will get in the way, sending the kids to school, new cars, etc. We just alway try to pay whatever we can. Good luck to you.