Mortgage Rate Averages
In calculating the tax savings from interest payments, you must use your marginal tax rate or the average tax rate
The TurboTax and HR Block quick calulators seem to use the average tax rate to determine tax savings. Our average tax rate was 15% this year. Most other calculators are specifically designed for calculation of interest tax savings using marginal tax rate, which for us is 25%. What should we use for an accurate assessment of our tax savings? We are thinking of buying a dwelling, and this weighs heavily in our decision making.
Calculate your taxes with a home then add the home and see how much it changes. If you get the standard deduction a few are over 10,000, so that part is not savings. When you have a house, you have property taxes and interest to deduct plus then your state income or sales tax and charity are deductible. If you do not do charity and pay $ 3,000 property tax only interest in about 6K will reduce your taxes and will reduce it to your marginal rate, so you'll save 25% of 6K or around 1500 maybe 2000 if you have high state taxes.