Home Ownership Tax Savings

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Home Buyers Real Estate Learning Center
Home Ownership Tax Savings:

Owning a home means a significant income tax break
You are making mortgage payments right now.
The difference is that you're making your landlord's mortgage payment

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When you purchase a home the interest on your mortgage and the real estate taxes due on your property are both tax deductible. Consider this example: On a $100,000 mortgage with an 8% interest rate, you pay $8,000 in interest your first year. If this property has real estate taxes of $1,000 each year, you make a total of $9,000 worth of tax-deductible payments. If you income is $40,000, without a home, you pay taxes on $40,000. Now that you own a home, that $9,000 of tax-deductible payments will be deducted and you'll only pay taxes on $31,000. If you are in the 25% tax bracket, you'll receive a tax rebate of $2,250 (25% of $9,000) at the end of the year!

However, you don't have to wait. When you started your current job you filled out a W-4 form. This form determines the withholding allowances that you're going to claim on your income. You never had a reason to complete the back of that form. Now that you own a home you have a very good reason. By claiming the legitimate withholding allowances you receive from home ownership, in the example above, you will receive approximately $187 more per month in take home pay instead of having to wait until the end of the year courtesy of your new home.

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REMEMBER you are paying interest and Real Estate taxes right now--- they're just not yours, they're your landlords. Your landlord is receiving these benefits....
Home Ownership Tax Savings, Part 2

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