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Comment by slezakattack | Hacker News Reader

I just described a home that is $100k less than the $1MM example. The property tax rate in San Jose is roughly 1.3% of the price of the home you bought it at. So for $1MM, you're looking at $13k in property taxes, not to mention a higher mortgage overall from my example. A quick mortgage calculator tells me that we're adding another $400/mth for the $1MM example. This doesn't include the second mortgage which will roughly be $100,000 loan at about 6.5% interest.

So, you're telling me that the $1MM home (which will be roughly $5600/mth) will give you nearly $20k in tax deductions (in order to meet your ~$4000/mth)?? Effectively making your property taxes free for you? You're either delusional or I am going to have a very exciting tax season come next April...

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> So, you're telling me that the $1MM home (which will be roughly $5600/mth) will give you nearly $20k in tax deductions

Something like that.

Federally, local property taxes and mortgage interest on the first $1 million of principle for first and second mortgages for your primary residence are deductible from your income. For California, the rules are slightly different, but I think that they are close enough to use the same rules for estimation purposes.

Using the interest rates from your example that would be a deduction of 4.5% * $800k + 6.5% * $100k = $39.7k for the mortgage interest deduction and roughly $12.5k for the property tax deduction for a total deduction of $52.2k. If you can afford a million dollar house, you are probably in either the 28% bracket or the 33% bracket for federal taxes and in the 9.3% bracket for California taxes so that will save you $14.6k-$17.2k on federal taxes and $4.9k on California taxes.

Your combined interest on both roughly tracks 4.1-4.7% overall.

See my comment below.

“so 900k mortgage at 4.1% interest is ~3k of interest and 1.2k of principal for first month. Now you have 1k/month of property tax, 0 HOA (i was not talking about a condo), and 180$/month of insurance. I've been quoted 80-10-10 which have 0 PMI fees. Let's be safe and assume that you're taxed at 30% at your highest level. Its likely you're being taxed at 40% though. Now doing some math.... 3k*0.7 + 1.2k + 1k+0.7+.180k = 4180$/month. Obviously there's maintenance and other costs but that's how much its actually costing you.”

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