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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4066
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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I am looking to buy a coop apartment in New York city. The

Resolved Question:

I am looking to buy a coop apartment in New York city.
The total monthly maintenaince including real estate tax is $2,460 for 705 shares owned.
I currently have no deductions and pay the most taxes possible under federal and NYS tax laws.
My income is $270,000. per year
How much of the $2,460 may I expect to get back at tax time?

Thank you
MP
Submitted: 2 years ago.
Category: Tax
Expert:  Stephen G. replied 2 years ago.

Stephen E. Grizey :

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.


 

Stephen E. Grizey :

Unfortunately, not very much, if anything since you say you have no other deductions. You would be able to deduct any mortgage interest if in fact you are financing the acquisition. As far as the monthly maintenance is concerned, the only deduction would be related to the portion that is allocated to real estate taxes. There's nothing else in that monthly payment that would be deductible.


 

Customer:

The property is $750K I would finance 75% of it.


When doing a purchase cost analysis with the Corcoran group, the tax deductibility says 52%


for a tax bracket of 38.5%


Making a monthly saving of over $1,000.


Would that be my deduction?

Stephen E. Grizey :

The deduction is not the savings, it is the tax rate times the deduction which is what you are showing.


 

Stephen E. Grizey :

What is the 52% applied to?


 

Stephen E. Grizey :

That savings assumes that the computed deduction is all deductible, but in your case that wouldn't be the case as you say you don't have enough other deductions to cover the standard deduction; however, you would have your state income taxes as a deduction on your federal return, so that & whatever else you might have, contributions, etc. may cover your standard deduction & therefore the entire 52% would be deductible; that times your tax rate would be your actual savings.


 

Customer:

This is where I am unclear,


The chart says the 52% tax deductibility is applied to the $2,500 maintenance charge if I am at the 38.5% tax bracket?


If in fact I have no other deductions and it becomes a handicap, it may not be interesting tax wise to own?

Stephen E. Grizey :

Of course, we aren't sure what the incremental tax rates will be for 2013 as we don't know what will happen as far as whether or not the so called "Bush Tax Cuts" will be extended.


 

Stephen E. Grizey :

The 2500. doesn't include your mortgage interest which would be deductible also.


 

Stephen E. Grizey :

If 52% is deductible, that must be the real estate taxes on the condo;


 

Customer:

That is right. The 2,500 are basically real estate taxes + building maintenance.


at 3.65%, the deduction on the mortgage is not going to be high.

Stephen E. Grizey :

Well, you have the state income taxes also


 

Customer:

Thank you Stephen,


It looks like I would need to sort that out with more info and an accountant that has all the financials of the building.

Stephen E. Grizey :

750 x 75% = 562,500. x .0365% = approximately $20,531. ($20,000.)


in interest the first year.

Stephen E. Grizey :

You would multiply that times your tax rate to get the savings on the mortgage.


 

Stephen E. Grizey :

So $20,000. x say 33% (Best guess federal) = $6,600. tax


savings on the mortgage interest

Stephen E. Grizey :

As far as the maintenance $2,500 x 12 = $30,000. x 52% = $15,600. x .33 = $ 5,200. tax savings on the maintenance fee.


 

Customer:

Thank you Stephen.

Stephen E. Grizey :

So $6,600. + $5,200. = $11,800. tax savings from owning the condo.


 

Stephen E. Grizey :

So depending upon your financing terms (length of your mortgage note); you'll be laying out $1,800. + - a month on the mortgage, + 2,500. on the maintenance fee so a total of $4,300. - $4,500. a month; for which you will get approximately $1,000. back in tax savings.


 

Stephen E. Grizey :

$270,000. x 30% = 81,000. traditional recommended limit on home cost per year;


 

Stephen E. Grizey :

You have $30,000. plus 21,000.-25,000. or a maximum of $55,000. or approx 20%of your annual income which is well within the guidelines; plus you'll get approx $12,000 of that in tax savings; so your out of pocket will be around $40,000. - $43,000


.

Stephen E. Grizey :

Sounds like a good deal to me; hopefully the 750K is reasonable in this market & the Condo will appreciate in value over time.


 

Stephen E. Grizey :

There will also be an additional benefit for NY income tax purposes; which will be a small additional benefit;


 

Customer:

It is a coop.


I am actually buying shares of the building

Stephen E. Grizey :

I understand, but it works the same way;


 

Stephen E. Grizey :

The shares relate to the value of your condo & the allocated percentage of the common areas;


 

Stephen E. Grizey :

Must be a nice place;


 

Customer:

If you feel like looking at it, it is unit 19A on 440 East 57th street in NYC.


The listing is with Corcoran website.


What state are you in Stephen

Stephen E. Grizey :

Please remember to rate my response in order that I can get credit for my answers.


 

Stephen E. Grizey :

Massachusetts; I'm very familiar with Corcoran; I worked at Coopers & Lybrand with one of the Principals; Is it still Corcoran & Jennison?


 

Stephen E. Grizey :

They have a good reputation.


 

Customer:

Not sure.


On that listing, there is a "purchase cost analysis" which gives you some indications but there are so many more factors that come into play.

Customer:

I wanted to make sure I could receive at least the $1,000. this analysis is suggesting.

Stephen E. Grizey :

Yes, you should get at least that.


 

Customer:

Thank you again and best regards,


Martial.

Stephen E. Grizey :

please remember to rate my answers


 

Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4066
Experience: Extensive Experience with Tax, Financial & Estate Issues
Stephen G. and 7 other Tax Specialists are ready to help you

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