The tax benefit is defined by the following equation:
(Tax Bracket x monthly interest payment) + (tax bracket x monthly property tax payment) + (tax bracket x monthly MI payment- if marked as deductible)
So if my client is at a 28% tax bracket and has a monthly interest payment (for month 1)of $500, a monthly tax payment of $100, and a monthly MI payment of $150, the equation would be: (.28 x 500) +(.28 x 100) + (.28 x 150) = $210
For the short and long term tax benefit, the totals of each payment (Interest, MI, Property Tax, Points) for that period added together and multiplied by the decimal form of the tax bracket.
- Added new functionality for 2018 tax benefit calculations:
- Added Standard Deduction field to TCA so when entered, the tax benefit will show the greater of either the standard deduction or the mortgage deduction.
- Added field to ask for filing status of borrower to determine cap of deductible interest per tax year. This field will show up only after you have entered a tax bracket in the Affordability screen.
- Added checkbox to determine whether to apply the property tax to the benefit calculation. ($10k per year limit). This checkbox will only show up if you have entered monthly property tax.
- Added refinance logic to allow for $1M deductibility cap on grandfathered loans from before 12/16/17
- Added question on all refinances to indicate whether to use cash out for Renovation. Checking yes will include the entire refi amount. Checking no will include only the payoff amount in deductions.
- If your loan amount exceeds the cap, only a percentage of that interest would be deductible. For example, if your cap is 750k, but your loan amount is 800k, only 93.75% of the annual interest would be deductible (750k divided by 800k to get ratio)