Tax Benefits of Homeownership

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The tax deductions you can take for mortgage interest and property taxes greatly increase the financial benefits of home ownership. Here’s how it works.

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Assume:

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$9,877 = Mortgage interest paid (a loan of $150,000 for 30 years, at 7 percent, using year-five interest)

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$2,700 = Property taxes (at 1.5 percent on $180,000 assessed value)

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$12,577 = Total deduction

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$3,521.56 = Amount you have lowered your federal income tax (at 28-percent tax rate)

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(12,577 X .28 = $3,521.56)

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

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