Jim Johnson

True or False: There is a tax benefit to buying a home with an FHA mortgage



Posted: Tuesday, November 03, 2009

by Jim Johnson
Metropolitan Mortgage

Things a Real Estate agent or FSBO should know. Well the answer is yes, no and maybe. Oh yeah how can that be? Is there more benefit to having a conventional or FHA mortgage? In the first year of an FHA mortgage or any mortgage for that matter there are extra deductions that make for greater tax benefits. After the first year tax benefits from an FHA mortgage are much easier to calculate. And since you will probably keep your mortgage for more than one year lets project tax savings for the second and subsequent years. The second thru fifth year of a mortgage will have similar tax benefits.

OK now that I got the lawyer crud out of the way some assumptions. Yes, yes I know what assumptions do. A single person and married couple are buying a home. The loan amount is $300,000 with annual property taxes of $2800. Terms are 30 fixed at 5.5%, so monthly payment is $1703.37. OK we have Jane Single (clever a single gal) and Jim Couple and Mary Couple married kids. Both make the same money (proving that women actually do make more than guys) $70,000 and this is taxable income.

From paragraph one above the part that is yes. If you happen to be single your tax benefits are pretty good. Without boring you to tears with numbers and such here it is. As a single person with taxable income of $70,000 you pay $11,513 in federal income taxes. When you deduct the $2800 in property taxes and the $16,399.19 in interest paid you lower your taxes to $8318 from $11,515. This is a saving of $3375 or $281 per month. So yes you do have a tax benefit.

Now the maybe or no part for M/M Couple. They have the sane taxable income in fact the same everything. Before they get their mortgage there taxes are $6896 and after they are $5726. There is a tax savings of $1170 per year of all of $97.50 per month. So the benefit is there buy you can definitely answer maybe or even no.

So Mr. FSBO or Ms. Real Estate Agent what do you tell your client. What do you say when the ask, "Is there a tax benefit when I buy a home with an FHA mortgage?' Now you can definitely say, "Yes or No or Maybe."

Everett-Mortgage-on-Line

Jim Johnson E.A. retired; (Enrolled Agent, licensed to practice law in tax court) BS -19+ year experience as an independent loan officer. My background is extensive: 15 years as an Enrolled Agent Licensed to Practice law in tax court, Real Estate Agent 15 years, BS Accounting, Economics University of Wisconsin - Milwaukee.

In 2009 I ran for mayor of Everett, WA I lost but did receive 30% of the votes.

Currently I offer local political commentary in KSER Radio 90.7 FM every Wednesday at 9:05 AM.

Viet Nam Veteran

Everett Mortgage on Line

This Article has been viewed 185 times. (Not updated in real-time.)
Top-level comments on this article: (1 total)
» left by Paul Schroeder
 2 years 198 days ago.
72 fans.
I am shocked that interest rates are that high considering the housing and financial markets status.One can buy a car at 0% interest!
We want your comments! If you can read this, you don't have javascript enabled, so you can't use this comment system. Please enable javascript.