Home Buying in Hoboken>Question Details

Markus.schif…, Home Buyer in Hoboken, NJ

Does the interest for the home loan reduce federal tax only or would it reduce the New Jersey state tax as well? Is property tax deductible, too?

Asked by Markus.schiffers, Hoboken, NJ Mon Oct 31, 2011

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Steve Gambutti’s answer
Hi Markus,

Your mortgage interest and property taxes are deductible from your federal taxes. There has been chatter in congress about eliminating mortgage interest as a deduction, but this is a very sensitive topic and it's highly unlikely in the current political and economic climate that this will become law. This tax savings is one of the main motivators for people to buy homes. Many prospective home buyers look at this tax savings when deciding how much of a mortgage payment they can afford.

Let's say for example you buy a home and your mortgage is $300,000 over 30 years at a 4.75%. Annually for the first few years you will pay about $14,000 in mortgage interest. If your tax rate is 15%, you will gain a tax credit of about $2000. The same goes for your property tax deduction. This is very generalized and requires a much deeper explanation, but the point is that the tax savings is very real money. And if you are paying less in income tax, you can in theory apply that savings to your mortgage payment and afford a higher mortgage then you could in rent. I suggest you talk to your real estate sales person, mortgage broker, and accountant for more detail about how it would effect your exact situation.
0 votes Thank Flag Link Tue Nov 1, 2011
Hello Markus, yes, your mortgage interest is deducted off of everything as well as your property taxes. Maintenance fees (for a condominium) cannot be deducted on a primary residence, but they can on an investment property.

Absolutely contact an accountant and review your situation. You can also check out the IRS website. If you need an accountant referral, I use Tax On Time in Rutherford NJ.
Best of luck!
0 votes Thank Flag Link Mon Oct 31, 2011
Markus in the past if you itemize your federal tax deductions you could deduct for interest on your mortgage, you will need to check with your accountant as this deduction has been reduced if not eliminated by the current admisistration. you can also go to http://www.irs.gov/publications/p936/index.html for infomrtaion from the IRS,
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Mon Oct 31, 2011
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