As a Realtor, I sometimes take it for granted that folks know and understand the tax benefits of homeownership. While many buyers do know and understand this, some folks haven’t heard that home ownership can be a tax benefit. Additionally, even those that know about the tax benefits may not understand exactly how the tax benefit can apply to them. Here is a simple breakdown that will hopefully give potential home buyers a better understanding of the tax savings possible through home ownership.
The tax deductions you’re eligible to take for mortgage interest and property taxes greatly increases 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 a 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.
For salaried employees that make good money and pay a lot of taxes, home ownership is a good way to offeset the taxes they pay every year. Tax savings is one of the many benefits of home ownership. For more on how home ownership can benefit you, visit the buyer’s library on my website at http://www.JosephCapote.com.
Filed under: Buyer's Blog, first time homebuyers, mortgage interest tax benefits, tax benefits of home ownership, tax benefits real estate
Joe Capote 