Tax Credits on Mortgage Loan - A Fairy Tale

We are hooked on to CNBC and read extensively on how to make a better return on the hard earned money. We know a company matched 401k is a no brainer and also tried our hands at stocks and options trading.   You get the picture. Most of us consider ourselves as savvy when it comes to finance and savings. However, when it comes to home ownership as a way to increase the net worth, our opinions are divided.

Some do extensive spreadsheet analysis on renting vs owning a home and almost always come out with a decision that renting is better. There are a lot of details spread throughout the sheet with cost side outweighing the numerical benefits.  Interest expenses, property taxes, maintenance, furnishing and even the added cost of transportation from the new location to office and opportunity cost of down payment are all neatly figured out.  Others are skeptical about this number juggling as it understates the appreciation potential,  tax benefits and the sheer happiness of owning a home.  Also, they are inclined to believe the gurus who recommended for decades that home buying is the way to create wealth. It’s not clear the recent mortgage meltdown proved the opinion wrong as we still hear them from our blaring TV shows. My intention here is to call out just one situation that’s often missed out in this analysis paralysis.

The idea of deducting a huge sum from taxes is, without doubt, the most appealing proposition to the new home investors. Almost 70% of your mortgage payments in the first full year are interest payments and property taxes and they are tax deductible. This is a fact and I will explain in a bit why it is deceiving a statement to many.

Let us do some simple math for a $500,000, 30 yr, 4% mortgage with a 20% down payment. Assuming you are living in California, you could deduct approximately $15,000 in interest payments and about $6,000 in property taxes. A total of $21,000 is qualified as a tax deductible in the first year. Say you have earned $150,000 and that means your taxable income is now drops to 129,000 when you itemize your expenses.   Typically someone in this tax bracket would end-up paying 15% taxes so a quick estimate is that you saved at least $3,150 (15% of 21K) with your decision of buying a home. When you do the tax preperations, soon you realize that you did not save $3,150 because when you itemize, the standard deduction that was applicable to you earlier was lost.  Let us assume that you are eligible for a standard deduction of $12,000 (married filing jointly), your benefit from itemization is only $9,000 not $21,000. So this means you get a tax credit of only $1,350 not $3,150. Further, you could now itemize state tax and vehicle registration fees, say another $6000.  So that will jack up your tax credits by another $900 or a total $2250. So question is for a $190 per month benefit, will you sign-up to be a homeowner in these uncertain times?

Adds to the grievance is that size of an average  mortgage is less than $500,000 and interest rates are at historic lows making the tax credits to drop even more. So the argument “You get a tax benefit close to the property tax you pay” is simply wrong when you take in to account the standard deduction you enjoyed in the past.   Personal situation can vary as a million dollar jumbo home loan or 5% down payment or a 35% tax bracket could produce a different number but that’s not common.

Let me call this tax break a fairy tale but at the same time, let us pursue the American dream. A place of our own brings a lot into our life that a spreadsheet seldom captures.

Irvine DJ- One Stop Shop for Asian Food

Diamond Jamboree(D J) is a strip mall in Irvine but usual descriptions don’t   seem to fit this delicious hang out place of mine in Orange County.  At Jamboree-Alton Cross Street, twenty two exclusive food joints, serving extra ordinary food of the world, has slowly been evolved as my gourmet Asian kitchen,  just a couple of miles far from home.   Don’t let the upscale looks and fine décor discourage you – these exquisite restaurants are reasonable and casual and so just right for every day meals.  Of course, it’s not about the look and feel, with an abundance of food within the footage, they sure know dishing out a bad meal is helping their slow extinction. Today, I write this blog to make a claim.  I have eaten in all twenty two restaurants at least once.
 

Guppy House is a Taiwanese style restaurant with a big happy fish logo and you will see it first while entering through Alton Parkway entrance.  Then you notice a hipster crowd sipping a variety of flavored teas.  Menu does not dominate fish like the logo does. We ordered a Spicy dumpling stuffed with pork and its came in a bowl dipped in hot sauce, vinegar and crushed peanut. Dumpling in vinegar based sauce was first time for us and it turned out to be a good pick.  Every other table had one item same. Chicken popcorn- small pieces of chicken nuggets flavored with pepper, garlic and many other spices.  Youngsters seem to relish them but we had our beef noodle soup to finish.

 Just opposite to Guppy’s is Ajisen Ramen and make sure you order a beef enoki roll , tiny enoki mushrooms wrapped in  thinly sliced  marinated beef and lightly pan fried  with a sesame seed garnish , as a starter. Their Ramen- noodle soup has a white broth and is made from slow cooking of tender pork ribs.  I liked the spicy beef ramen better than their signature pork one. Then there is an instantly pleasing slightly sweet pumpkin-tapioca desert to top up the soft noodle heap inside.

Next door is a Thai Bristo called Papaya and in fact their green Papaya salad is quite a treat for veggie lovers.  Beef basil and Pad See Ew are competent and the sticky rice with sliced mango on the side is an anytime desert. The Korean restaurant BCD Tofu’s name comes from Buk Chang Dong , a Korean city where the owner was trained in cooking and it’s now a 16 location strong  limited chain.  This is the place to go for when you wake up late in the night craving protein. They serve 24/7. We loved the boiling red hot soon tofu soup served in a sizzling stone bowl with a variety of  side dishes (banchan)  that include fermented Korean veggies (kimchi), a fish and  a portion of galbi (grilled beef) . Make sure you crack the raw egg on the top of the boiling soup. It was late by the time we figured it out so we had to come back some other day to complete the black magic ritual. I loved the galbi and it’s a feast to the eyes to see so many vivid verities of food served on the table with inviting texture and color.

We walk past Kula Sushi most of the days but still can’t miss the well designed rolls rolling on a conveyor belt.  At $2 a plate, it’s a quick and cheap bite but do not experience a great ambience or service.  I would stick to the spicy tuna, eel or California rolls and take my sashimi adventures elsewhere. 

 Capital Seafood is the only mainland Chinese restaurant in this strip mall.  A crispy clean ambience and contemporary upscale furnishing is not really translated into the price on the menu.  Dim Sum carts will come rolling just after you are seated and the friendly ladies persuade you with a variety of steaming small portions. Persuasion is probably exaggerated as you are already stupefied and all you ask is a large pot of hot leafy green tea with the dim sums you picked.  While eating, you will notice that Chinese families, often a party of five or more, are sharing large portions of well made duck, fish, beef, crab and vegetables and they look nothing like what’s on the menu.  Our theory is that they have off the menu items that only Chinese know and so we quiz the waiting staff. To pick an entrée, a super soft filet Mignon (beef) with black pepper sauce stands out every time we eat there. They have a more spacious location in Irvine spectrum mall and offer a large selection of wines and beverages. If you are in hurry, the next door is Capital Seafood Express BBQ and Dim sum place for takeout boxes.

How about standing in a line for half an hour to buy some sweet buns?. We are talking about 85^o C, the Taiwanese bakery next to Capital Seafood.  After a couple of reluctant walk offs,  we plunged in and the lady stood next to us in the line  said she was visiting Orange County from the Bay  area and her  friend mentioned that 85^o C is a must visit place!   When you get to the door,  it opens up a new world of buns and breads  glazed or filled  with Taro, coconut, raisin, custard, sweet cream, tuna and many other things. Everything is fresh out of oven as there are so many people waiting outside for their turn.  Buy a unique Sea Salt coffee, grab a chair outside and munch the milk buns with coffee.  You don’t regret the time spent on standing in the line.  

                                                                                                                                     

 I am skipping the Yogurt land frozen yogurt and Lollicup flavored tea places to proceed straight to a Taiwanese specialty noodle place, Chef Hung Noodles.  Chef Hung is the King of Taiwanese Beef Noodle.  Inside, there is a large window to the kitchen where you could watch the chefs prepare your soup. The spicy beef shank soup had a thinner flavorful broth base and slightly thicker but nice chewable noodle that our three year old happily slurps in.  It’s not just soups, you could also find some other Taiwanese pork and vegetable dishes on the menu but everyone seems to be busy with their award winners.

Our baby has a favorite dinner place too. CoCo Ichibanya Japanese curry house where she gets her chicken cutlet and mild curry sauce.  There are so many curries to choose from and surely there is one that matches your taste bud. This is part of a large retail chain in Japan and their only store in the USA.  However, if you are after a large selection of Japanese food in a sit down, relaxed setting, just hop into spacious Tokyo Table, the corner end of the DJ mall.

Tokyo Table serves you the contemporary Tokyo City cuisine right here in Orange County. Also, they pick some of the best appreciated food from around the Asian world and blend it with traditional Japanese style to make a pleasing fusion.  Every plate in motion looks like an intricate art work with a healthy balance so even the most hungry  will wait a bit up, admiring it, before the devour begins.   Hot and cold Sake served just right and the garlic shrimp rice in a sizzling hot stone bowl was the highlight of my last visit.  Slightly high on the price point but the ambience, the quality and the service outweigh the perceived wallet damage.  And you will never complain there is not enough in the menu to choose from.

There is a super chic Shabu-Shabu place (at least the owners love to call it that way) with a very modern layout and décor where people are always busy dipping their thinly sliced marbled rib-eye steak into a boiling kelp water bowl and then make the swish-swish   sound while eating them. The name of the place - SWSH Shabu Shabu- pretty much describes this process. Balcony Grill next to this restaurant is a Taiwanese grill and bar and serves the draft beer by pitcher. While the food is just above average, their shaved snow desert is a must try.

Along the Jamboree side of the mall there are four more restaurants that bring in a little more diversity to the table. Chae Bahn Korean BBQ place, Pho Saigon Perl that serves Vietnamese, Greek Islands cuisine serves lamb flavored gyros and Kicking Crab, the latest addition to the list,  which  serves Louisiana Cajun Food.   When you are tired of noodles, rice and soups there are a couple of sandwich places to go to.  Sandwich Club serves you a quick banh mi sandwich –a Vietnamese French fusion – so you still have the option to chew flavorful marinated meat inside a hoagie.  Bon Épi Patisserie & Café is the closest you can get to for a European sandwich with freshly baked artisan bread and deli style meats. I know I rushed  not to describe them but at this point I feel eating in each of these joints is so appealing a proposition than writing about them.

Thinking about cooking these Asian delights in your kitchen? Go to HMart in the same mall to get all your Sauces, meat, fresh vegetables,seafood and even utensils.   Seafood, vegetables and fruits here are very fresh, reasonably priced and there is a wide variety to choose from.  And don’t forget to check out the bakery and Korean restaurant inside HMart!