<prompt> Human: Im sorry for something basic but I trust you all and cant seem to understand such a basic idea. Whats tripping me is Ive never really looked at itemized deductions vs the standard. Im slowly saving for a down payment and would be looking in next 2-3 years to buy a home. Unfortunately I live in southeast Michigan which has insanely high property taxes. Just as an example. Say Im making 85,000 year, no kids wont change, filing single I am single, and Im looking at homes with estimated tax of lets as an example say 5000 a year as a round number. Isnt the standard dedication close to 6000? So if I just claim the standard do I get any relief from the property taxes? Im guessing interest on the loan complicates matters too. But thats another topic I suppose since the interest for that will always be going down. Assistant: One thing to remember is you can deduct interest on a 150,000 house at 4 APR, this is 500 per month.Then you deduct property taxes. You can also deduct sales tax OR state income taxes. If those combined are above the standard deduction, then you would itemize. Most homeowners, especially new home owners in higher income tax brackets will almost certainly benefit from itemizing. You are looking at 5k in property taxes, likely more than 6k in mortgage interest although this depends on purchase price and down payment and APR, and since you make 85k, you likely pay a decent amount in state income tax. likely 3k or so. In Michigan I assume you pay more in income taxes than sales tax, so that is likely the one you would want to claim. If you had a major purchase, such as a car perhaps then deducting sales tax would get you a better refund.The interest does go down, but it goes down somewhat slowly. Human: See thats where Im confused. How much do I actually save? Basically Im wondering if I paid 5000 in taxes whats the actual price. Like does it end up being only 2500 paid? Because I cant figure out how anyone with 1 income could afford even a cheap home in his area otherwise. Id like the freedom of a house but maybe Ill just rent forever... :-Assistant: would definitely recommend you itemize based on the information youve given. Property tax mortgage interest State income tax OR state sales tax. You can deduct all of these. You say you earn 85k a year. ignoring health insurance and retirement your taxable income with a standard deduction for 2015 wouldhave been be 74700 85 - Personal exemption 4000- standard deduction 6300Tax burden: 14469For itemized deductions, Ive tried to keep it simple just for this example: Property tax 5000 as you said mortgage interest 200k at 4, assuming your first payment was in January 9984 in interest! -this is the highest itll be State income tax OR state sales tax. Dont know your state tax rate, but guessed 3 2241So itd be:85000 - personal exemption - itemized deductions85000 - 4000 - 50009984224185000 - 4000 - 17725 63275. Tax 11590 approaching 3k less!. With these very hypothetical figures, its definitely worth it. ALSO, there are quite a few things in the closing costs that can be deducted in the first year points on the mortgage, for example, some MIP if youre under an income threshold etc. Id definitely recommend having an accountant do your taxes the first year. These numbers dont take into account other possible deductions and credits you might be eligible for.As a sidenote: I grew up in the UK and it wasnt until I bought a house I finally understood why American films used to have a scenes of a family storing all their receipts in a shoebox or something - i guess it was for tax time so you can add up sales tax deductions i think in practice the state income tax will usually be more, some states obviously dont have a state income tax!EDIT: these numbers might be a bit off, but hopefully you can see the point I was trying to make, namely that if you own a home, its pretty likely that youll want to itemize this is especially true if your property tax approaches the standard deductionHuman: Another addition to what I already said - I dont think its a good idea to build a tax return into your budgeting as to whether you can afford a house. You never know what might change in the tax code - for example, although this seems very unlikely, the US is the only western country that still allows mortgage interest to be deducted; if that ever changes your budget would be in trouble. Id suggest looking at your salary and expenses as they are now and try to stay under 30 of your gross income going to a mortgageproperty taxes. I think its possible, again, depending on property prices where you live.Assistant: Thanks... just doesnt seem worth it when I think about utilities and insurance. If I lived without a mortgage having my whole house paid off. Id still be paying 5000 year in taxes, another 2000 in insurance prolly, and like way more a month in utilities. My rent is 800 month an electric is about 40. So even if I owned a home outright the taxesinsuranceutilities would be almost what I pay in rent now. And I wouldnt own the home for 30 yearsWouldnt it make more sense to just rent an invest the money I saved on owning a home? Just depressing really. No credit card debt, feeling like Im doing everything correct in life. But I gotta pay taxes for other people having kids. No wonder American dream is dead. Might as well die.  <response>: Your rent isnt going to keep being 800month for the next 30 years. 