Who's ahead at the end of the year? the renter or the buyer?

Renter, paying $3000/mo.

OR

Purchaser of a $500,000 condo with $8000/yr. in taxes and $500/mo. Maintenance. (assuming a $450,000 mortgage w/ a 30-year fixed rate mortgage @6.5%, which comes out to a monthly payment of $4,011)

Okay, this was probably a no-brainer. (I'm a real estate agent...)

The purchaser spends less. But how much less?

• Less than $1000
• $1000-2000
• $2000-3000
• Over $3000?

The answer is over $3000. ($3,328.09) The difference is due to your Federal income tax payment. If you earn over $78,850 (single) you are in AT LEAST the 28% tax bracket. (A dollar earned puts 72 cents in your wallet.) The purchaser can take a tax deduction of $37,250. The monthly income tax reduction is $869 and the principal on the mortgage is paid down by $419, so the purchaser pays $277 LESS each month than the renter does.

Put another way, over the course of a year, the renter pays more than 13 months rent (Taxtember? Your Uncle Sam thanks you for the additional $869/mo.)

If this makes sense to you, let me know. You can buy a VERY nice condo in Jersey City for $500,000.