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TAX BENEFITS OF HOMEOWNERSHIP
Dated: March 18 2021
The tax deductions you're eligible to take for mortgage interest* and property taxes greatly increase the financialbenefits of home ownership. Let's work through a hypothetical situation to see how it works.
If we assume the following:
- $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 by which you have lowered your federal income tax*Mortgage interest May not be deductible on loans over $1.1 million. In addition, deductions are decreased when totalincome reaches a certain level.
**The rate at which you're taxed is determined by your tax bracket, which in turn is determined by how much youearned in a given year along with your filing status (single, married filing jointly, married filing separately, or head ofhousehold). IRS Publication 501 will help you determine your rate.
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