Tax Deductions Can Make Homeownership as Affordable as Renting

tax papersTax deductions can make homeownership as affordable as renting

Unlike renters, homeowners get part of their monthly payments back at tax time. That’s because the mortgage interest they pay is (in most cases) fully tax deductible.

For a mortgage payment of, say, $1,000 (principal and interest only), you could purchase a home for $151,426 if you put a 10% down payment on a 30-year loan at 8%. If your payments started in January, your first-year mortgage-interest tax deduction would be $10,862.

Assuming you are in the 27.5% tax bracket, you would save $3,041 in taxes–that’s $249 per month. So the $1,000 payment mentioned earlier is really $751 when computing the homeowner’s tax advantage.