Tax Benefits of Homeownership

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

Assume:

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

$2,700  =  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 28 percent tax rate: $12,577 x 0.28  =  $3,521.56

$3,521.56  =  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.


Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®

Copyright 2008. All rights reserved.