If I buy an apartment in NYC will I be able to deduct the full mortgage interest (first $750K) and property taxes from my state and local as well as Federal (SALT)?

[Vanessa A]

Yes, if your itemized deductions are greater than your standard deduction you can claim the full mortgage interest on the first $750k.  You can also take a deduction for your property taxes and state and local, but the limit for all of the taxes combined is $10,000. 

[DN76]

Right, but isn't that just for Federal? SALT allows a max 10K deductible which is state and local income and property taxes combined. But in addition to that, can I also deduct the mortgage interest and property taxes from my state and local tax return?

[PattiF]

Yes, you can deduct the property taxes and mortgage interest on your state return. The amount of state and local taxes is not subject to the federal limit.

New York City taxes are collected by New York State.

[DN76]

Thank you, PattiF.  When you say: "New York City taxes are collected by New York State," I assume you mean that's included on the state tax return, there's no additional return. Ok, so this means I can deduct 100% of my property tax and mortgage interest from my NY state and local taxes? What would be the rate of the deductions? 5.97% for State and 3.88%, meaning in total I'd receive 9.85% of my total mortgage interest and property tax back for the year? Is that how it would work? Thanks.

[Opus 17]

---

@DN76 wrote:

Right, but isn't that just for Federal? SALT allows a max 10K deductible which is state and local income and property taxes combined. But in addition to that, can I also deduct the mortgage interest and property taxes from my state and local tax return?

---

State and local income taxes and property taxes you pay to New York State are never tax deductible on your New York State tax return.  That's just how NY calculates their taxes.  Mortgage interest is deductible in NY.  Turbotax will do this automatically when it calculates the NY state return. 

[Edited to correct, you can deduct property tax on your NY income tax return. You can't deduct NYS or NYC income taxes on your NYS or NYC tax return.]

[ErnieS0]

Yes. New York City income is a part of the New York state return. You do not have to file a separate city return.

New York does not limit deductions for state and local income tax or for mortgage interest as terrific Tax Champ @PattiF explained.

Itemized deductions

Your deduction would depend on your New York tax rate.

2021 tax tables

[DN76]

Thanks. The thing is I'm trying to calculate how much money I'd get back from my property tax and mortgage interest were I to buy a co-op. Is there a way to calculate that?

Say for example my annual mortgage interest were $25K and my property taxes were $12K.
I think I can figure out what happens with my Federal due to the $10K maximum from SALT and my 22% rate income. But how would I calculate my state and local deductions and how much I would get back?

[Opus 17 · Accepted solution]

---

@DN76 wrote:

Thanks. The thing is I'm trying to calculate how much money I'd get back from my property tax and mortgage interest were I to buy a co-op. Is there a way to calculate that?

Say for example my annual mortgage interest were $25K and my property taxes were $12K.
I think I can figure out what happens with my Federal due to the $10K maximum from SALT and my 22% rate income. But how would I calculate my state and local deductions and how much I would get back?

---

At the federal level, your total deduction for state income tax, city income tax, and property tax, is capped at $10,000.  If you can afford a $750K apartment, you are probably close to that already, so you won't get much added deduction from the apartment property taxes.  Deducting $25K of mortgage interest would reduce your federal income tax by $5,500, if you are in the 22% tax bracket.

On your state income tax return, adding $12K of property taxes and $25K of mortgage interest would reduce your state income tax by $2500-$3500, depending on your income and tax bracket, and would reduce your city tax by about $1400.   This assumes that your total itemized deductions are already larger than the standard deduction.

The NYS standard deduction is $8000 single and $16,050 for married filing jointly.  If your itemized deductions are less than that, that will reduce the tax savings of your new apartment.  Only the amount over the standard deduction will result in a tax savings (7-10% state income tax and 4% city income tax). 

[DN76]

Thanks, Opus. I'm a little confused. You said:

The NYS standard deduction is $8000 single and $16,050 for married filing jointly.  If your itemized deductions are less than that, that will reduce the tax savings of your new apartment.  

But I mentioned I'd be deducting $25K mortgage interest and $10K property tax, so that's over the $8K and $16050 you mentioned, right. So it would make sense to itemize my state taxes, right? Or are you just giving me those numbers for info?

Also, if myself and my girlfriend are on the mortgage, I assume we'd have to split the mortgage interest and property tax deduction 50/50?

So, based on 7% state income tax and 4% city, am I right in thinking the overall net benefit of the $35K property tax and mortgage deduction over  a standard deduction (two people filing as single not married) would be around $2085

$35K x 11% = $3850 -  itemized
$16.050 x 11% = $1765 -  standard

[Opus 17]

"Also, if myself and my girlfriend are on the mortgage, I assume we'd have to split the mortgage interest and property tax deduction 50/50?"

You would deduct the portion you actually paid.  It might be 50/50, but it might not be, depending on all your circumstances.  

"But I mentioned I'd be deducting $25K mortgage interest and $10K property tax, so that's over the $8K and $16050 you mentioned, right. So it would make sense to itemize my state taxes, right? Or are you just giving me those numbers for info?"

Filing single, you get a free standard deduction of $8000 even if you have nothing specific to deduct.   If we assume you have no other itemized deductions (no medical expenses, miscellaneous deductions, property tax or gifts to charity) then your deduction is $8000.  If you buy this apartment, and pay $35K in deductible taxes, the tax effect is that your total deductions are $27K more than previously.  So your savings are (7% x $27K).   On the other hand, suppose you already deduct $5K of other itemized deductions like gifts to charity. You are still taking the $8K standard deduction on your tax return.  Your new itemized deductions would be $40K ($35K in taxes plus the original $5K) so your total deductions are $32K more than previous and your tax savings will be 7% x $32K. 

If you split the expenses evenly, then your new deduction are $17K each.  But you have to look at your current situation to see how much that $17K will really increase your deductions from the free $8K you may already be getting. 

[DN76]

Thanks. 

If you split the expenses evenly, then your new deduction are $17K each.  

Why would my new deductions be $17K each if I were deducting a total of $35K each in property taxes and mortgage interest, or 40K if you include the $5K to charity in you example?

But you have to look at your current situation to see how much that $17K will really increase your deductions from the free $8K you may already be getting. 

Again, this I don't get. Surely a 17K deduction is better than a free 8K reduction? Or do you mean in regards how much money that actually saves me vs how much extra it costs me to itemize?

[Opus 17]

---

@DN76 wrote:

Thanks. 

If you split the expenses evenly, then your new deduction are $17K each.  

Why would my new deductions be $17K each if I were deducting a total of $35K each in property taxes and mortgage interest, or 40K if you include the $5K to charity in you example?

But you have to look at your current situation to see how much that $17K will really increase your deductions from the free $8K you may already be getting. 

Again, this I don't get. Surely a 17K deduction is better than a free 8K reduction? Or do you mean in regards how much money that actually saves me vs how much extra it costs me to itemize?

---

Your facts are not clear.  You have given several different amounts for the mortgage and property taxes, and only recently mentioned a co-owner.  You may deduct whatever mortgage interest and property taxes you actually pay.  If you and the co-owner split the costs 50/50, then you would deduct half the total, whatever it is.  

When you are discussing tax savings due to a new situation, the question is not "how much are my new deductions", but "how much more will my deductions be with the new situation compared to my current situation."  If your current deductions are $8K and your new situation will give you a deduction of $17K, then any new tax savings comes from the new portion of the deductions.  (In this example, $9K of new deductions.)

You will have to consider your current NYS/NYC tax returns to see what the effect would be of new deductions.  If you print some extra copies of your 2021 return, you can add deductions and do some of the math yourself.  

[DN76]

Thanks a lot Opus and you're quite right, I confused myself by giving two different property tax figures because I was thinking of the 10K salt max for federal. So, yes, it should've been 25K for mortgage and 12k for property tax. Anyway, thanks a lot for your help, I appreciate it. Is there a simple calculator where you can input these figures and see the tax you'd pay? I have a very simple situation. Just employment income, nothing else. I simply want to see how much different apartments will cost me after state and federal tax deductions on the mortgage interest and property taxes.

[ThomasM125]

You can use the Intuit TaxCaster tool to estimate your taxes based on the income you enter. Here is a link:

Intuit TaxCaster

@DN76