What are the tax benefits of home ownership?
The tax deductions that you are eligible to take for mortgage interest and property taxes greatly increase the financial benefit of home ownership. Here is how it works:

Assume that you pay $9,877 in mortgage interest in one year (based on a loan of $150,000 for 30 years, at 7%, assuming you are in the 5th year), and $2,700 in property taxes annually (1.5% on $180,000 assessed value). You will be able to take a tax deduction for $12,577. In order to translate that into your actual savings, multiply your total deduction by your tax rate. Assuming you are in a 28% tax bracket, you will lower your federal income tax by $3,521.56 ($12,577 X .28).

There are additional benefits (as well as potential consequences) with investment property, so be sure to pow wow with your accountant prior to making a decision. Mortgage interest may not be deductible on loans over $1.1 million, and deductions are decreased when total income exceeds a certain level.

Posted By: Liz Moore on Tuesday, July 27, 2010