The tax deductions you’re eligible to take for mortgage interest* and property taxes greatly increase the financial benefits of home ownership. Let’s work through a hypothetical situation to see how it works.
Let's do an example and use the following information:
$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 total income 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 you earned in a given year along with your filing status (single, married filing jointly, married filing separately, or head of household). IRS Publication 501 will help you determine your rate.
Changing Real Estate Dreams Into Realty Since 1985
Christine Henderson - BH&G Bradfield Properties 210-827-2858