I'm trying to insure that I understand US tax laws with regard to itemization and mortgage interest, in order to calculate whether to take out a mortgage in order to maximize my 5 year gains with the end goal being FIRE. I have never purchased a home before but I have heard from friends that I am losing out on a tax shelter by not doing so. I pay 19k in rent annually.
I am projecting to earn 188k this year and I expect that to increase by 1-2% per year for the next 5 years, which is the period of time I wish to model in terms of buying vs renting and if the latter, how much to "buy" via a mortgage. I understand that the standard deduction is much higher now due to the tax law changes in 2018. I file single so that the IRS website says the standard deduction for me is $12,200 for 2019. Deductions for state and local taxes are limited by the 2018 law to $10,000, but due to my income, I owe this much in state income tax liability anyway. So, as I understand it, I can itemize and deduct the 10,000 i pay in state income taxes plus whatever interest I pay on a mortgage. Thus, if I take on a mortgage that pays interest of more than $2,200 per year, I would see a reduction in my federal tax liability? Plus I am paying to own the home instead of paying 19k in rent.
Thus, if I buy a home for 400k and put 20% down, I would finance 320k, and at 3.512% on a 15-year fixed, pay almost 50k in interest over the next 5 years. To confirm my understanding, as long as I am able to itemize more than the $12,200, the interest is deductable? Since my state income liability plus property tax on the home would easily exceed the single filers $12,200 standard deduction, I would recieve on average over the 5 years in question, 10k in mortgage interest deduction, correct?
Am I thinking about this correctly?