Hi,
PITI generally includes four components of a mortgage payment - principal, interest, taxes, and insurance.
The interest and real estate taxes are deductible components.
The principal and home owner's insurance - are not deductible.
Your mortgage amount is $300.000 - estimated interest payment for the first year - assuming 5% interest (please confirm) - $15.000.
Real estate taxes - assuming $3000 - please confirm.
You need to add other items deductible on your itemized deduction schedule A
California taxes - $6000 - please verify
charitable contributions - $1000 - please verify
Total deductible expenses $25,000
Assuming you file a joint tax return - your standard deduction $11,400
Your ADDITIONAL estimated deduction above the standard amount $25,000 - $11,400 = $13,600.
The number of additional allowances to use on the form W4 - $13,600/$3,650 = 3.7 - so you may use 3 or 4 additional allowances.
Let me know if you need any help.
Some adjustments...
Your mortgage amount is $300.000 - estimated interest payment for the first year - assuming 5% interest - $15.000.
Real estate taxes - assuming $3750
California taxes - $5325
Total deductible expenses $24,100
Please verify other items to be included - personal property tax, job related expenses, investment expenses, etc.
Your ADDITIONAL estimated deduction above the standard amount $24,100 - $11,400 = $12,700.
The number of additional allowances to use on the form W4 - $12,700/$3,650 = 3.48 - so you may use 3 or 4 additional allowances.
1) What is that $3,650?
$3,650 is the amount of personal exemption for 2009 - any additional deduction of $3,650 above standard deduction amount is equal to one allowance to claim on W4 form - http://www.irs.gov/pub/irs-pdf/fw4.pdf
2) If my wife currently reflects 2 on her W4, and I reflect 1, can you break down what numbers each of us will want to change to on the W4 forms that we submit to our respective employers?
Generally one of you should file W2 as married and another as married but withhold at higher Single rate.
Each of you may claim two allowances plus you may use three additional allowances from additional itemized deduction.
3) Can my wife and I expect to be able to change our W4s partway through the tax year?
If you find out that your withholding is too low or too high - you may change W4 filing in the middle of the year.
Tax Preparer
Taxes, Immigration, Labor Relations