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Old 08-02-2009, 09:56 AM
 
Location: Central Ohio
10,807 posts, read 14,869,714 times
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Quote:
Originally Posted by Missourimomo View Post
Don't believe these high numbers these folks are spewing out. I have lived a fine lifestyle on less than 16,000 a year income. I do alot of traveling on this amount. Most people will retire on less than 20,000 a year. "Retirement" was unheard of prior to WW11. Whatever they tell you that they themselves retired on; you can divide that amount by 4 then substract $30,000. Check out this retirement site.
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Unless you are in a high tax state I don't buy the big numbers either.

With just our two social security checks and a small state pension my wife and I figure we'll have a $3,700 a month income and going through our budget, which includes setting $400 a month aside for medical, we should be able to save nearly $1,500 a month.

When I retire everything will be paid for, I am doing all the remodeling work now, just put on a new roof all in preparation for retirement. I am getting the house in tip top shape so I shouldn't have to deal with high cost repairs.

We picked where we live for weather and low tax rates.
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Old 08-02-2009, 10:45 AM
 
11,150 posts, read 15,923,185 times
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Quote:
Originally Posted by mathjak107 View Post
not off base at all, all im saying is your calculations for what your net costs of buying here should start after the standard deduction.... couldnt you say the first 11,400 were actually your mortgage interest and you got nothing back actually yet over the standard deduction ? you could say that and then figure your are getting back 1/3 of the state and local taxes you paid......
I'm sorry, but that makes no sense whatsoever. Even if we go with your example, that still puts me ahead of the renter because I would be getting 1/3 of my state income taxes back and he would be getting a pittance back because he didn't have the mortgage interest & property tax to use to take up the first $11,400.

Quote:
Originally Posted by mathjak107 View Post
what were playing with here is called marginal tax rate....that means you look at things like the very next dollar or deduction puts you in the next bracket....
C'mon, give me a little credit. We've had enough interaction on this board for you to realize that I don't need an education on marginal tax rates.

Quote:
Originally Posted by mathjak107 View Post
.... the renter who pays 13-15,000 in state and local but has other deductable expenses such as medical will end up with the same deduction dollar wise....
You're not comparing apples to apples here. You're comparing a renter who has medical deductions (which of course don't even begin to be counted until they exceed 7 1/2% of AGI) that equal the mortgage interest and property tax of a homeowner to a homeowner who has absolutely no medical or other deductions. Not only is it not comparable, it isn't even realistic.
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Old 08-02-2009, 10:49 AM
 
105,860 posts, read 107,820,907 times
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i re-edited the post because it was sooooooooooooo confusing, maybe now its easier to follow the logic
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Old 08-02-2009, 10:52 AM
 
105,860 posts, read 107,820,907 times
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interest and real estate taxes are expenses and deductions like any other...so while you may get back the extra money spent on those items the renter may get back some additional medical expense or other deductions after the standard deduction....either way there is more money coming out of the ole piggy bank then coming back.......


you may not need an explanation on marginal rates but the other thousand people viewing our posts most likely do
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Old 08-02-2009, 11:08 AM
 
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Quote:
Originally Posted by MadManofBethesda View Post
I'm sorry, but that makes no sense whatsoever. Even if we go with your example, that still puts me ahead of the renter because I would be getting 1/3 of my state income taxes back and he would be getting a pittance back because he didn't have the mortgage interest & property tax to use to take up the first $11,400.






C'mon, give me a little credit. We've had enough interaction on this board for you to realize that I don't need an education on marginal tax rates.



You're not comparing apples to apples here. You're comparing a renter who has medical deductions (which of course don't even begin to be counted until they exceed 7 1/2% of AGI) that equal the mortgage interest and property tax of a homeowner to a homeowner who has absolutely no medical or other deductions. Not only is it not comparable, it isn't even realistic.
BUT WHAT IF HE HAD OTHER DEDUCTIONS TO FILL UP THE FIRST 11,400 THEN HE WOULD GET BACK AS MUCH AS YOU IN THE STATE INCOME TAXES... THATS WHY I TRIED TO USE THE MEDICAL OR CONTRIBUTION OR ANY OTHER DEDUCTIONS TO FILL THE BUCKET FOR THAT MATTER FOR ILLUSTRATION. hey where did the caps come from... thats better...
so heres the question, what if you paid all cash? how would you compare that to renting?

one of the reasons i say dont count the deduction until after 11,400.00 is because that deduction first off varies .... from practically an entire mortgage payment in the beginning down to nothing at the end..... it can vanish with the amt tax being tripped in a heart beat and you get nothing....... rather then people base a net cost on such a variable number its better to just accept your overall financial situation as a hole each year. if you had other deductions from other investments such as investment property or un-traded reits that have a depreciation allowance if you figured you were getting back 1/3 of that deduction and they go to fiill the standard deduction instead so you can figure deducting your mortgage interest then your calculations on return on those will be flawed..... pulling 3 bucks out of your piggy and maybe getting back anywhere from nothing to 1 dollar on my taxes isnt something id choose to even compute to see if i could afford to buy a place based on the return of possibly that dollar


there is no real reason to count it..... just look in the ole piggy bank to see whats going on bottom line

Last edited by mathjak107; 08-02-2009 at 11:29 AM..
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Old 08-02-2009, 01:18 PM
 
105,860 posts, read 107,820,907 times
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before we put this to bed i thought of a good example

you want to compare buying to renting.


your mortgage interest is11,400 your real estate taxes are 11,400 and the state and taxes you paid 11,400...

so when comparing to the renter who say had 5,000 in actual money paid out but got the 11,400 standard deduction anyway do you figure nothing back on your mortgage interest and figure 1/3 back on everything else, do you figure nothing back on the state and local and reduce your housing costs by both the amount you got back on the real estate taxes and mortgage or do you add it all up , subtract 11,400 and use that number.....


how would you do it toward the end of the mortgage when you were still paying 2,000 a month and have next to no mortgage interest to deduct...

suppose you were in the 28% bracket this year and made alot less next year and now are in the 15% bracket... do you sell the house and rent because your monthly cost shot up even though you can afford the bills ?



you can see it isnt as easy to deal with as you thought,,....best thing is keep the deductions as just that...lump them together with every other deduction you get add them all up and keep them totaly seperate from computing your housing cost... look at how your overall financial situation looks ....if everything all together got you a 5,000 buck refund then you have 5,000 more bucks in the piggy increasing what you had... i prefer to say my net worth is 5,000 more from the refund then my housing costs were reduced by whatever......... keep it seperate or you will go nuts trying to get them to mean something.
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Old 08-02-2009, 01:25 PM
 
Location: SoCal desert
8,091 posts, read 15,371,328 times
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Quote:
Originally Posted by mathjak107 View Post
....if everything all together got you a 5,000 buck refund then you have 5,000 more bucks in the piggy increasing what you had...
No, that means you gave the government an interest-free $5000 loan and you should go adjust your payroll or quarterly taxes
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Old 08-02-2009, 01:43 PM
 
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Quote:
Originally Posted by mathjak107 View Post
how would you do it toward the end of the mortgage when you were still paying 2,000 a month and have next to no mortgage interest to deduct...
Well, assuming rent has increased 3% per year, after 24 years my principal & interest payment (now mostly principal) will still be $2000/month whereas the renter will be paying $4,000/month.

Or, if we assume that the renter started off at $1,300/month (which is what the after-tax cost of a $2,000/month mortgage payment would be), he would be paying $2,600 month in rent while my $2000 is mostly going to equity by now which will be returned to me when I sell my house.

But even in that scenario, that assumes that a renter can rent an equivalent house for 2/3 of a monthly mortgage payment. I don't know where you live, but around these parts, that just ain't happening.
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Old 08-02-2009, 02:12 PM
 
105,860 posts, read 107,820,907 times
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its all about how the renter invests the down payment he didnt plop down and until the rent becomes more then buying how he invested that money....


as my 2 examples above here in new york city using my own experiences show renting was the way to go from a purley financial point. i have been an avid investor for over 23 years now. i own a home in pa as well as rent in new york. , we own a family real estate business which owns co-op apartments over looking central park.... and i have a pretty diversified investment portfolio and track them all.... here in new york it was possible for the renter to beat the buyer by over 2x even after subtracting out the rent since even a 50/50 mix can appreciate at 7% long term average it surpases the typical rent increase by double.... not all areas are the same, not all investments will do the same and not all property will appreciate the same so the point is its not something anyone can figure out in advance , only be aware that rent or buy its possible to do as well in either case.... our own portfolio did so well over the last 20 years by investing the money instead of buying something with it that the portfolio pays our rent and is still 1,000 bucks ahead each month from buying.

Last edited by mathjak107; 08-02-2009 at 03:02 PM..
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Old 08-02-2009, 03:15 PM
 
Location: DC Area, for now
3,517 posts, read 13,232,947 times
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Quote:
Originally Posted by mathjak107 View Post
its all about how the renter invests the down payment he didnt plop down and until the rent becomes more then buying how he invested that money....


as my 2 examples above here in new york city using my own experiences show renting was the way to go from a purley financial point. i have been an avid investor for over 23 years now. i own a home in pa as well as rent in new york. , we own a family real estate business which owns co-op apartments over looking central park.... and i have a pretty diversified investment portfolio and track them all.... here in new york it was possible for the renter to beat the buyer by over 2x even after subtracting out the rent since even a 50/50 mix can appreciate at 7% long term average it surpases the typical rent increase by double.... not all areas are the same, not all investments will do the same and not all property will appreciate the same so the point is its not something anyone can figure out in advance , only be aware that rent or buy its possible to do as well in either case.... our own portfolio did so well over the last 20 years by investing the money instead of buying something with it that the portfolio pays our rent and is still 1,000 bucks ahead each month from buying.
NYC is not representative of most other places in this country. It has a great deal of rent controlled apartments and the real estate is extremely expensive. In most places, there is no rent control or very limited and rents tend to cover the purchase/maintenance amount and then some. So in most places, you do better over the long run by buying. In effect, by buying, you get rent control by stabilizing your monthly outlay for housing (assuming a fixed mortgage). Renting in most places means periodic rental increases that keep pace with real estate markets.

By buying, you get equity. Rents are simply gone with no return at all and for most of us, the money that would have to be spent on rent is comparable to a mortgage/tax/ins., so there is no additional money saved from rents to invest.

I was wondering why Math's discussion on this subject was uncharacteristically not making a lot of sense - we are talking past each other with radically different financial scenarios because of the uniqueness of NYC.
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