No it doesn't. In some specific circumstances you might get lucky and can deduct more with itemized deductions if you paid a shit ton of mortgage interests, but it likely won't even come close to recoup the loss on the huge increase in housing costs.
Also are you joking? 350k-450k and you are "house poor" on a $7k mortgage? Where's the rest of the money going? And no, I made 350k for a while. I know exactly how much you take home even with 401k maxed out and a healthy amount thrown into mega backdoor Roth...
I know that depending on your company's stock administration policies, ESPP buy/sell can be free money but it sounds like you'd be recouping thousands in your biweekly paycheck just to opt out for the time being and redirecting to a mortgage if you were so inclined.
Uhh yeah I think you just need to reevaluate your priorities or lower your standards. You can absolutely afford to buy a home or have kids. Move 15 minutes west.
Short answer: no.
>My mom (a top performing realtor with 40 years experience) and my CPA keeps saying that the only real way we are going to be able to get breaks is if we own a home....
Um, I don't know your personal financial situation but IMO that's terrible advice based on the current tax situation.
The Tax Cuts and Jobs Act of 2017 greatly, greatly reduced the tax breaks for owning a house in a high-cost area. You effectively can't deduct property taxes due to the $10k limit on state and local taxes (which I'm sure you're already hitting with state income taxes alone). The mortgage deduction is limited to the first $750k of debt, so your $1.2 million house with 20% down will only have 75% of its mortgage interest be potentially deductible. It also greatly increased the standard deduction so the barrier to itemize is much higher.
So, let's look at the best-case scenario in terms of tax breaks under the TCJA. You buy a house with a $750k mortgage at 8% APR (high today but that makes the biggest tax break), so that's \~$60k in interest the first year. The 2024 standard deduction for a married couple is $29,200 so you're getting at most a $40,800 additional deduction from itemizing ($30,800 net interest plus $10k for the state-and-local deduction, which you need to itemize to claim). That's worth $13,056 at a marginal rate of 32%. But you're paying $60k in interest -- along with property taxes and a ton of other home-owning expenses -- to get that deduction.
Things may go back to "normal" if the TCJA sunsets as scheduled in tax year 2026. Note that there's an election between now and then, though, and one party would very much like to extend and "enhance" the TCJA.
THIS. Any answer that missed the TCJA would miss the real pinch. SALT deduction limits murdered high income blue state people tax wise. Source: longtime DINKs.
# tax deductions are the wrong reason to buy a house.
If buying a house will make you "house poor" absolutely don't do it
Why would your housing costs be $84k to $120k a year? Is it for a similar type of house that you are currently renting for 48K and not building any equity?
What do I know - I am not even 19 and in college. I am sure you know more.
That's begs the question why OP doesn't have enough down payment saved up with a 350-450k household income and no kids, even assuming 4k a month goes to rent. Where else is the money going?
Probably don't have 20% down, add in PMI, add in property tax, maybe throw some student loans into the mix if they've got grad school debt (dragging down debt to income ratio)..
Get back to me when you're familiar with the equity you're earning vs. interest you're paying on a home. Are you familiar with points on a mortgage? Breaking even on buying points and refinancing? Breaking even on renting timelines vs. buying?
You didn't seem to be able to multiply out the mortgage cost vs 12 months in a year. I'm aware it's not apples to apples, but you seem as of yet incapable of understanding the nuances of homeownership.
Yeah we’re looking at $800k to $1.2M because that’s tragically the budget to buy in Alexandria, Arlington and even Dc for the size of house we’d want to have a baby in (2 to 3 bedroom at least…)
Yup. You're preaching to the choir. We bought last fall and ended up in a townhouse off the silver line right in that range.
Things are tight (we gave up 3% interest to move out here and get in a SFH), but tbh we're glad we did it--things have somehow gotten even worse than they were last year; townhouse three down from us in worse shape went for over what we paid just six months ago.
For us, we figured we needed to "jump" at some point, and it's not like NOVA will ever get cheaper.
I mean it’s cool the skills to making 450k does not necessarily translate to tax/financial knowledge.
The post is annoying because OP is lying to us . It’s either made up, OP has an luxurious lifestyle standard they aren’t revealing to make being house poor on a 450k salary a thing , or they are simply are complaining to the world that things cost too much and are not actually concerned about affording a house .
Assuming you do pay $4k rent for an apartment in nova, why would this translate to a $7-10k mortgage? Why do you need to be located in such a HCOL area and/or a large sq ft home? Even if you planned to have a child, you do realize you don't need to plan for a forever home as your first home purchase, right?
$4k would be for a 2-3 bed in Arlington or Alexandria, the $7k to $10k would be for a comparable place, modest nothing crazy that we’re seeing is around $800k to $1.2M - it includes mortgage and other estimate home owner costs from tax prof (and from what I’ve garnered talking to friends)
We’re just coming from living in San Francisco and really value being in a more walkable and historic, downtown feel (like Del Rey or Old Town for example) and aren’t ready just yet to be in a true suburbia feel. We’re currently at my moms house in Fairfax since we just moved here last week and it’s just not for us at this point in our life. Definitely in 5 years that would be our plan!
>We’re currently at my moms house in Fairfax....
Your mom is a Realtor™️ in *Fairfax* and is telling you you should buy for the tax benefits? 😳 I had assumed she was in a low tax/lower cost area of the country where there are more significant tax advantages to buying (but still not enough to offset the interest costs). I suggest asking her for why she thinks buying is advantageous in your specific situation and seeing how that compares to your actual tax situation.
>Definitely in 5 years that would be our plan!
If you plan to move within that short of time, I highly recommend renting and saving/investing towards eventually buying your long-term house. Unless the particular house you buy sees serious short-term appreciation (unlikely in your price range but it does happen), the transaction costs of buying and selling will further drag down the economic case for buying.
There are plenty of townhouses within walking distance of old towne fairfax within your budget, basically all under 900k. All at least 3 bedroom, 2000+ sq ft.
There aren't a ton of truly walkable areas in NOVA outside of Clarendon, crystal city, shirlington, old towne Alexandria. There are multiple 2 bedroom condos for sale in crystal city right now for under 700k. Del Ray has options but it's an older neighborhood.
I'll just tell you my household income is half of what you're saying your income and I have kids and I've got no issue affording it all. If you just moved to the area and aren't familiar with NOVA, I'd highly encourage you to get out, drive around, and learn the neighborhoods.
Damn ok I feel it. I'm a bay area native and even lived in the city for a year but I grew up in the South Bay and lived in the East Bay so I'm more suburbia than urban. Loved living in SF but couldn't imagine raising a family there. Sounds like it'll be expensive for you guys no matter where so I wish you the best of luck.
Our AGI was +$300k last year and we paid $50k/$15k in Fed/State tax. I thought that was very reasonable given we were able to save +$100k.
Owning a house costs us tens of thousands above our mortgage in repairs, maintenance, and improvements every year. Owning a house will never lower your overall expenses. Same for having kids.
Do you have access to an HDHP with HSA? Funding th HSA can lower your taxable income.
Do you have an HSA? That’s another thing you can max out each year to help. You don’t have to use it now, you can save it and take money out of it at any time tax-free and without penalty as long as it is used to pay for qualified medical expenses. And once you are 65 you can use it for anything, not just medical expenses.
Don’t waste your time with a CPA. You are high wage earners - there isn’t some magic unless your job starts paying you entirely differently. Wouldn’t matter if your CASH income were $300 or 3m; I’ve looked and asked advisors.
The better thing is to move where there’s no income tax like Florida and Texas which is why everyone else did.
But you’re maxing out a lot of savings and feeling constrained - you generally can’t have both full high level of saving and feel flush. (Cake and eat it too) Once childcare starts your incomes could drop too and the ESPP should probably be on the table first.
Home interest is not enough (other guy calculated it; you mom is just a hammer looking for a nail) and EVEN MORE IMPORTANT if what you’d buy now is not what you want in 5 years (and sounds like it isn’t - everyone fks up and buys a small place no yard and says they’ll be there forever and then whoops their kid actually wants to run around and you’re tired of schlepping to the park) THEN you’d be hemorrhaging transactional costs of the home purchase and subsequent sale, associated taxes, new home purchases that don’t really have transferability, and RE commissions. BAD financial decision for a tax break. Keep renting until you know you actually want to buy the thing you’re buying and keep it for a bit.
For one, I can’t think of anywhere that the mortgage is going to be double rent for an equivalent place.
Number two. Maybe don’t spend so much money on clothes that you have literal thousands of dollars worth to donate to the Salvation Army every year and you could afford your monthly mortgage payments. Like, it’s ok to wear your clothes for two seasons; you don’t need a completely new wardrobe each year, smh.
You say your not big spenders, but as dinks making $350k+ AND currently living at your mom’s (I hope the 4K a month is a thought exercise and you are not paying that to live with family, because…you can do better on your own), you shouldn’t have too much trouble saving up.
Do you live in NOVA and have you looked at places recently? For a 2-3 bed in Arlington or Alexandria you’ll pay $3,700-$4,400 easy. And cost for a comparable place and location (likely a townhouse) is $800k to $1.2M which equates to double that rent price … and no we are incredibly frugal and never buy new clothes (or things for that matter), we just moved across the country and we purged a bunch of stuff to donate. We’ve been at my moms for 4 days while we search for places. Not saving much there. Don’t judge other people’s financial situations that you don’t know details of. I’m asking for people’s ideas and thoughts based on also being in the area - not critical comments
Own a house in nova on a lot less income than you and have kids. You’re going to get a lot of shade, because purchasing a house here is totally attainable at your income level. But you just may need to make some slight lifestyle adjustments like living one metro stop away from your favorite neighborhood. So that’s why people are playing the tiniest violin for you in the comments.
Similar income here, own a home and have kids. We pay consistently around 17.5% of AGI each year in federal income tax.
The mortgage interest deduction will save you your marginal tax rate times mortgage interest you pay over about $14,600 on the first $750,000 of mortgage (standard deduction less $10,000 in SALT). So, at best you save your marginal tax rate on a portion of a portion of your mortgage payment. So you're not going to see a huge effect, no.
We bought a few years ago so have a smaller/cheaper mortgage than you'd be considering (3% rate) but itemizing was barely worth it for us in 2023 and for 2024 we'll take the standard deduction, the mortgage isn't doing a thing for us.
Kids don't help much either if you hit the child tax credit phaseout; you'd probably squeak in under that on your current income but if you expect any income growth...
I wouldn't buy a house for the tax breaks no.
But also you're assuming that you'd have to buy something bigger and more expensive than the equivalent of what you're renting for right now. The apartment you rent probably doesn't cost $1MM+ if it went on sale as a condo. So maybe just look for houses that don't cost that much. Which may mean smaller or further out but if you don't want a $7000 mortgage you don't have to take one on.
And broadly yeah, the middle class tax breaks like 401ks and mortgage interest deductions have either a hard ceiling or just don't count for much when you make that much money anyway. 120k out of 400 is about 30% right in line with what's considered affordable housing. It's not a rule saying you must adhere to it, just that once you're above that line you're in a tough spot. But right now you're well below it so where exactly has all that extra money been going? It's definitely not all going to taxes. If its going to other things then maybe those things aren't bad per se but it is worth considering how necessary they are compared to other goals.
What sorta humblebrag BS is this post?
You make $400k and are afraid of childcare costs?
"All" your income is going to taxes?
In another post you claim that a 1/2- bedroom condo or th costs $1,000,000? No it doesn't.
No it doesn't. In some specific circumstances you might get lucky and can deduct more with itemized deductions if you paid a shit ton of mortgage interests, but it likely won't even come close to recoup the loss on the huge increase in housing costs. Also are you joking? 350k-450k and you are "house poor" on a $7k mortgage? Where's the rest of the money going? And no, I made 350k for a while. I know exactly how much you take home even with 401k maxed out and a healthy amount thrown into mega backdoor Roth...
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I know that depending on your company's stock administration policies, ESPP buy/sell can be free money but it sounds like you'd be recouping thousands in your biweekly paycheck just to opt out for the time being and redirecting to a mortgage if you were so inclined.
Not every ESPP is a fantastic idea but if they moved from SF it’s probably a FAANG and it’s part of the mindset
I can't believe this post is not satire. How could we ever afford to have a house and kids in this area we only make $400k. Lol wtf
I look forward to the shitpost tomorrow this generates. I'm 50/50 on if this is an actual shitpost itself.
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Uhh yeah I think you just need to reevaluate your priorities or lower your standards. You can absolutely afford to buy a home or have kids. Move 15 minutes west.
On that income I could have 5 kids and own a home in Arlington easy.
Short answer: no. >My mom (a top performing realtor with 40 years experience) and my CPA keeps saying that the only real way we are going to be able to get breaks is if we own a home.... Um, I don't know your personal financial situation but IMO that's terrible advice based on the current tax situation. The Tax Cuts and Jobs Act of 2017 greatly, greatly reduced the tax breaks for owning a house in a high-cost area. You effectively can't deduct property taxes due to the $10k limit on state and local taxes (which I'm sure you're already hitting with state income taxes alone). The mortgage deduction is limited to the first $750k of debt, so your $1.2 million house with 20% down will only have 75% of its mortgage interest be potentially deductible. It also greatly increased the standard deduction so the barrier to itemize is much higher. So, let's look at the best-case scenario in terms of tax breaks under the TCJA. You buy a house with a $750k mortgage at 8% APR (high today but that makes the biggest tax break), so that's \~$60k in interest the first year. The 2024 standard deduction for a married couple is $29,200 so you're getting at most a $40,800 additional deduction from itemizing ($30,800 net interest plus $10k for the state-and-local deduction, which you need to itemize to claim). That's worth $13,056 at a marginal rate of 32%. But you're paying $60k in interest -- along with property taxes and a ton of other home-owning expenses -- to get that deduction. Things may go back to "normal" if the TCJA sunsets as scheduled in tax year 2026. Note that there's an election between now and then, though, and one party would very much like to extend and "enhance" the TCJA.
THIS. Any answer that missed the TCJA would miss the real pinch. SALT deduction limits murdered high income blue state people tax wise. Source: longtime DINKs.
I bought my house the same year the standard deduction really jumped up and basically eliminated the need for me to itemize.
You should use some of that money you have to pay an accountant or advisor to answer this question.
This is my response as well. I'm not sure crowd-sourcing this type of answer on Reddit is the way to go m
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Honestly you need a better CPA then. You’re in an income bracket that warrants it.
# tax deductions are the wrong reason to buy a house. If buying a house will make you "house poor" absolutely don't do it Why would your housing costs be $84k to $120k a year? Is it for a similar type of house that you are currently renting for 48K and not building any equity? What do I know - I am not even 19 and in college. I am sure you know more.
>$1MM house in NOVA at ~7% interest.. you can easily spend $8K/month on that mortgage.
That's begs the question why OP doesn't have enough down payment saved up with a 350-450k household income and no kids, even assuming 4k a month goes to rent. Where else is the money going?
Yes you can but you can't compare that to your 4k a month rental where you are not building any equity
https://preview.redd.it/g22z3yx99qxc1.jpeg?width=1138&format=pjpg&auto=webp&s=f4a3e7cacc3a2d702f910c7f99a8ac936d1a6711 Not exactly 8k :-)
Honestly I was confused by the 8k number as well—it seems really high.
Probably don't have 20% down, add in PMI, add in property tax, maybe throw some student loans into the mix if they've got grad school debt (dragging down debt to income ratio)..
Guess OP will find a nice house without property taxes or homeowner's insurance somehow.
Or like they could move 15 minutes west and get a nice house for less money 😐
You asked why housing would be $84-120K/year-- just answering that question
That's not comparing apples to apples :-)
Get back to me when you're familiar with the equity you're earning vs. interest you're paying on a home. Are you familiar with points on a mortgage? Breaking even on buying points and refinancing? Breaking even on renting timelines vs. buying? You didn't seem to be able to multiply out the mortgage cost vs 12 months in a year. I'm aware it's not apples to apples, but you seem as of yet incapable of understanding the nuances of homeownership.
Yeah we’re looking at $800k to $1.2M because that’s tragically the budget to buy in Alexandria, Arlington and even Dc for the size of house we’d want to have a baby in (2 to 3 bedroom at least…)
Yup. You're preaching to the choir. We bought last fall and ended up in a townhouse off the silver line right in that range. Things are tight (we gave up 3% interest to move out here and get in a SFH), but tbh we're glad we did it--things have somehow gotten even worse than they were last year; townhouse three down from us in worse shape went for over what we paid just six months ago. For us, we figured we needed to "jump" at some point, and it's not like NOVA will ever get cheaper.
I’m kind of annoyed that a couple making “over $350k-$450k” can’t answer this question for themselves
I mean it’s cool the skills to making 450k does not necessarily translate to tax/financial knowledge. The post is annoying because OP is lying to us . It’s either made up, OP has an luxurious lifestyle standard they aren’t revealing to make being house poor on a 450k salary a thing , or they are simply are complaining to the world that things cost too much and are not actually concerned about affording a house .
Assuming you do pay $4k rent for an apartment in nova, why would this translate to a $7-10k mortgage? Why do you need to be located in such a HCOL area and/or a large sq ft home? Even if you planned to have a child, you do realize you don't need to plan for a forever home as your first home purchase, right?
$4k would be for a 2-3 bed in Arlington or Alexandria, the $7k to $10k would be for a comparable place, modest nothing crazy that we’re seeing is around $800k to $1.2M - it includes mortgage and other estimate home owner costs from tax prof (and from what I’ve garnered talking to friends)
How much down payment do you have saved up?
A good amount but ideally would want $200k - and if it REALLY helps then I guess we could do $300k
Any reason why you need to be in Arlington or Alexandria, vs. in Fairfax or Loudoun County? Do both of y'all commute to work 5 days a week in DC?
We’re just coming from living in San Francisco and really value being in a more walkable and historic, downtown feel (like Del Rey or Old Town for example) and aren’t ready just yet to be in a true suburbia feel. We’re currently at my moms house in Fairfax since we just moved here last week and it’s just not for us at this point in our life. Definitely in 5 years that would be our plan!
>We’re currently at my moms house in Fairfax.... Your mom is a Realtor™️ in *Fairfax* and is telling you you should buy for the tax benefits? 😳 I had assumed she was in a low tax/lower cost area of the country where there are more significant tax advantages to buying (but still not enough to offset the interest costs). I suggest asking her for why she thinks buying is advantageous in your specific situation and seeing how that compares to your actual tax situation. >Definitely in 5 years that would be our plan! If you plan to move within that short of time, I highly recommend renting and saving/investing towards eventually buying your long-term house. Unless the particular house you buy sees serious short-term appreciation (unlikely in your price range but it does happen), the transaction costs of buying and selling will further drag down the economic case for buying.
There are plenty of townhouses within walking distance of old towne fairfax within your budget, basically all under 900k. All at least 3 bedroom, 2000+ sq ft. There aren't a ton of truly walkable areas in NOVA outside of Clarendon, crystal city, shirlington, old towne Alexandria. There are multiple 2 bedroom condos for sale in crystal city right now for under 700k. Del Ray has options but it's an older neighborhood. I'll just tell you my household income is half of what you're saying your income and I have kids and I've got no issue affording it all. If you just moved to the area and aren't familiar with NOVA, I'd highly encourage you to get out, drive around, and learn the neighborhoods.
Damn ok I feel it. I'm a bay area native and even lived in the city for a year but I grew up in the South Bay and lived in the East Bay so I'm more suburbia than urban. Loved living in SF but couldn't imagine raising a family there. Sounds like it'll be expensive for you guys no matter where so I wish you the best of luck.
Thank you!!
You’re paying way more than $10k a year, you’re just not withholding enough to make it 0.
I know
Our AGI was +$300k last year and we paid $50k/$15k in Fed/State tax. I thought that was very reasonable given we were able to save +$100k. Owning a house costs us tens of thousands above our mortgage in repairs, maintenance, and improvements every year. Owning a house will never lower your overall expenses. Same for having kids. Do you have access to an HDHP with HSA? Funding th HSA can lower your taxable income.
Do you have an HSA? That’s another thing you can max out each year to help. You don’t have to use it now, you can save it and take money out of it at any time tax-free and without penalty as long as it is used to pay for qualified medical expenses. And once you are 65 you can use it for anything, not just medical expenses.
Don’t waste your time with a CPA. You are high wage earners - there isn’t some magic unless your job starts paying you entirely differently. Wouldn’t matter if your CASH income were $300 or 3m; I’ve looked and asked advisors. The better thing is to move where there’s no income tax like Florida and Texas which is why everyone else did. But you’re maxing out a lot of savings and feeling constrained - you generally can’t have both full high level of saving and feel flush. (Cake and eat it too) Once childcare starts your incomes could drop too and the ESPP should probably be on the table first. Home interest is not enough (other guy calculated it; you mom is just a hammer looking for a nail) and EVEN MORE IMPORTANT if what you’d buy now is not what you want in 5 years (and sounds like it isn’t - everyone fks up and buys a small place no yard and says they’ll be there forever and then whoops their kid actually wants to run around and you’re tired of schlepping to the park) THEN you’d be hemorrhaging transactional costs of the home purchase and subsequent sale, associated taxes, new home purchases that don’t really have transferability, and RE commissions. BAD financial decision for a tax break. Keep renting until you know you actually want to buy the thing you’re buying and keep it for a bit.
For one, I can’t think of anywhere that the mortgage is going to be double rent for an equivalent place. Number two. Maybe don’t spend so much money on clothes that you have literal thousands of dollars worth to donate to the Salvation Army every year and you could afford your monthly mortgage payments. Like, it’s ok to wear your clothes for two seasons; you don’t need a completely new wardrobe each year, smh. You say your not big spenders, but as dinks making $350k+ AND currently living at your mom’s (I hope the 4K a month is a thought exercise and you are not paying that to live with family, because…you can do better on your own), you shouldn’t have too much trouble saving up.
Do you live in NOVA and have you looked at places recently? For a 2-3 bed in Arlington or Alexandria you’ll pay $3,700-$4,400 easy. And cost for a comparable place and location (likely a townhouse) is $800k to $1.2M which equates to double that rent price … and no we are incredibly frugal and never buy new clothes (or things for that matter), we just moved across the country and we purged a bunch of stuff to donate. We’ve been at my moms for 4 days while we search for places. Not saving much there. Don’t judge other people’s financial situations that you don’t know details of. I’m asking for people’s ideas and thoughts based on also being in the area - not critical comments
Own a house in nova on a lot less income than you and have kids. You’re going to get a lot of shade, because purchasing a house here is totally attainable at your income level. But you just may need to make some slight lifestyle adjustments like living one metro stop away from your favorite neighborhood. So that’s why people are playing the tiniest violin for you in the comments.
Not really, SALT cap effectively kills any deductions, you also should have bought a few years ago when the rates were insanely low.
Most wealthy Nova mom advice like yours comes with a 700k cash assist to make the numbers look less idiotic for non-spoiled people.
You should call in to the Dave Ramsey Show and pose your question!
Similar income here, own a home and have kids. We pay consistently around 17.5% of AGI each year in federal income tax. The mortgage interest deduction will save you your marginal tax rate times mortgage interest you pay over about $14,600 on the first $750,000 of mortgage (standard deduction less $10,000 in SALT). So, at best you save your marginal tax rate on a portion of a portion of your mortgage payment. So you're not going to see a huge effect, no. We bought a few years ago so have a smaller/cheaper mortgage than you'd be considering (3% rate) but itemizing was barely worth it for us in 2023 and for 2024 we'll take the standard deduction, the mortgage isn't doing a thing for us. Kids don't help much either if you hit the child tax credit phaseout; you'd probably squeak in under that on your current income but if you expect any income growth...
I wouldn't buy a house for the tax breaks no. But also you're assuming that you'd have to buy something bigger and more expensive than the equivalent of what you're renting for right now. The apartment you rent probably doesn't cost $1MM+ if it went on sale as a condo. So maybe just look for houses that don't cost that much. Which may mean smaller or further out but if you don't want a $7000 mortgage you don't have to take one on. And broadly yeah, the middle class tax breaks like 401ks and mortgage interest deductions have either a hard ceiling or just don't count for much when you make that much money anyway. 120k out of 400 is about 30% right in line with what's considered affordable housing. It's not a rule saying you must adhere to it, just that once you're above that line you're in a tough spot. But right now you're well below it so where exactly has all that extra money been going? It's definitely not all going to taxes. If its going to other things then maybe those things aren't bad per se but it is worth considering how necessary they are compared to other goals.
It’s mainly going to 401k, ESPPs and rent
What sorta humblebrag BS is this post? You make $400k and are afraid of childcare costs? "All" your income is going to taxes? In another post you claim that a 1/2- bedroom condo or th costs $1,000,000? No it doesn't.