Tax Advantages of Owning a Home

The tax deductions you are eligible to take for property taxes and mortgage interest greatly increase the financial benefits of homeownership.  Here is how it works.

Assume:

$9877 = Mortgage interest paid (a loan of $150,000 for 30 years, at 7 percent, using year-five interest)

$2700 = Property taxes (at 1.5 percent on $180,000 assessed value)

$12,577 = Total deduction

Then, multiply your total deduction by your tax rate.

For example, at a 28 percent tax rate: 12,577 x 0.28 = $3521.56

$3521.56 = Amount you have lowered your federal income tax (at 28 percent tax rate)

Note: Mortgage interest may not be deductible on loans over $1.1 million.  In addition, deductions are decreased when total income reaches a certain level.