How to Calculate the Tax Benefits of Homeownership

October 14th, 2008 // Categorized under: Real Estate

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

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

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This entry was posted on Tuesday, October 14th, 2008 at 1:44 pm and is filed under Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

  1. How to Calculate the Tax Benefits of Homeownership · Invest-In-Real-Estate.ExplainedOnline.Net said at October 14th, 2008 at 1:48 pm

    [...] Original post by | South County Real Estate Today [...]

  2. Harriet Pecot said at October 17th, 2008 at 10:30 am

    Hi Gretchen,

    I like the clear way you show people the benefits of the tax deductions. Not everyone realizes how owning a home and having a mortgage can reduce our current taxes – even in this economic mess! Keep up the good information.

    Thanks,

    Harriet

  3. Gretchen Merrick said at October 17th, 2008 at 10:53 am

    Thanks Harriet! Even if appreciation ain’t what it used to be, at least we have a tax deduction!

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