I've read just about anything I can find on comparing cash-flow between owning a house versus renting. One new thing popped into my head yesterday, and I can't shake the feeling that it's an obvious aspect that nobody talks about.
If you want to deduct mortgage interest, then you need to forgo the standard deduction, right? So estimating your tax savings needs to incorporate the loss of the standard deduction, but nobody ever mentions this.
Look at this example: Yahoo! Real Estate - Mortage Interest Tax Savings Calculator (example)
Let's say I finance $300k over 30 years at 4.1%. In the first year I pay about $12k in interest. This calculator assumes that if I'm in the 28% tax bracket, then my tax savings is ($12k * 0.28) ~$3400. This is almost $300 a month, and sounds like a significant savings on my monthly payments.
But if I give up the standard deduction, then my tax liability doesn't drop by $12k, it actually drops by ~$6k (single filer), and my tax savings is more like $1700, which is half as much!
Am I crazy or is this correct?