Reversing cash flow from mortgage deductions
Hi. I’d like to figure out how to get the cash in hand result from a deduction for year 1 of ownership of a property. I realize the real-life scenario is more complicated than this; but would love to understand a simplified method first. Simple scenario: 1MM property. 20% down. 800k loan. Let’s say 7% interest for sake of argument. 30% tax bracket. I think you’re supposed to figure out the ratio of 750k of 800k because of the cap. So that’s 0.9375. Just to keep the math easy, let’s say that the interest total is 55k a year. How do I figure out what that represents as cash in my pocket? I thought you should take the 55k * 0.9375 to get the max deduction of ~$51,500. Then you multiply that by tax bracket. .3 * $51.5k = ~$15.4k So the cash in hand result after the deduction is about ~15.4k? Any help is appreciated.
