Despite mfl's nice answer, I want to propose an alternative one: trace is invariant under an orthonormal change of basis, so I can pick a different basis and compute using that basis instead.
My choice:
$$b_1 = v / \| v \|$$
while $b_2, \ldots, b_n$ form an orthonormal basis for the hyperplane perpendicular to $v$.
Clearly $T(b_i) = b_i$ for $i = 2, \ldots n$. Hence there aren $n-1$ 1's on the diagonal.
And $T(b_1) = b_1 - (b_1, v) w$; inner-producting with $b_1$ gives
\begin{align}
m_{11} &= (b_1, b_1) -
\frac{1}{\|v \|} (v, v) (w, b_1) \\
&= 1 - \frac{1}{\|v \|} \|v\|^2 (w, v/\|v\|) \\
&= 1 - (w, v)
\end{align}
So the trace is $(n-1) + (1 - (w, v) ) = n - (w, v)$.