When we bought our first home I calculated the cost of the PITI, figuring the tax savings.

I haven't calculated it recently, and was curious with our new lower mortgage payment. Plus, there had been some questions on this lately. So I thought I would look at it again, here.

So, let's see.

Cost before tax savings:

Mortgage: $13,524 ($10k interest plus $3,524 principal payment = $13,524)
HOA: 828
Insurance: $1250
Prop Tax/Bonds: $4500
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TOTAL $20,102, or $1,675/month
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So, at face value, this is what we shell out. We could rent out the house next door for as much but it is only half the size.

But, we also have another advantage. Tax Savings! The tax savings was HUGE when we first bought in 1999. Over the years though, the benefit has decreased because the standard deduction has increased (renters can get the standard deduction) and because we have lowered our interest payment over the years.

We would be in the 15% tax bracket with or without out house, so will assume 15% tax rate either way. Some people will find more benefit from a house payment because it may drop them to a lower tax bracket.

So our tax benefit will mostly hinge on how much we can deduct above the standard deduction.

Our non-house itemized deductions are as follows:

Medical $5000
State Income Taxes $1200
Charity $500
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Total Deductions = $6700 without house
We would get to take $10,900 standard deduction in this case

Our itemized deductions with home, is as follows:

Medical $5000
State Income Taxes $1200
Charity $500
Property Taxes $4500
Mortgage Insurance $10000 (not the entire mortgage payment, just the interest portion. You can multiply your mortgage balance by the interest rate to get an idea what the interest portion will be for the year)
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Total Deductions = $21,200 with house

21,200 Itemized Deductions
-11,900 Standard Deduction
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9,300 Tax deductions due to home ownership

9,300
x 0.15 (15% tax rate)
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$1,395 savings
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So above, I Calculated home ownership cost us $20,102 per year. Subtract $1395 in tax savings, and it really cost us $18,707/year. Or $1558 per month.

If we were in the 25% tax bracket, home ownership would save us almost $200/month in taxes. So you can see what a difference it can make. Any tax savings, for us, is muted by our low tax bracket.

Anyway, my caveat is, if your income is high, this calculation may or may not work. There are other tax nuances, and at higher incomes you start to lose your itemized deductions. So this is just the basic idea, but can vary greatly depending on your own circumstances.

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Anyway, you could argue our tax savings wouldn't even cover home maintenance, so the true cost of our home is even higher. Perhaps.

But yeah, pretty much over the years, our tax savings has dwindled (ironically, primarily due to lower taxes, in general).

BUT, our first home was very different.

Interest on our first home was $17k/year. Property taxes were $4k. Our tax rate was 28% because we both worked, and because tax rates were much higher then. Standard deduction was $7200.

We probably paid around $4k in state income taxes as well. No medical expenses.

So,

$4k state income taxes
$4k property taxes
$17k mortgage interest
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$25k itemized deductions (first home)
-7,200 standard deduction
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$17,800 Deductions due to home
x 0.28 (28% tax bracket)
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$4,984 savings, or $415/month

Since it was a condo our maintenance expenses were VERY minimal. Since we only lived there 2 years, we had none.

So the place costs us about $2100/month with our HOA fees (high to cover external maintenance). We saved $415/month, in taxes. Net cost was $1685/month for a unit that rented for about $3k/month. It was a no brainer.

You could argue our deductions lowered us into the 15% tax bracket as well. Tax savings could have been greater. (They probably did early on when we only made $60k/year. We made $100k when we sold).

But you see, over the years, the tax advantage of owning our home has really dwindled...

& if you wonder why we moved, yeah, it cost $3k to rent a 3-bedroom apartment on the iffy side of town. Why we chose to buy for about half the monthly cost, and eventually to just move somewhere cheaper.