Oh, I’ll never forget how glorious the time was when I did my taxes after having bought our first home.  As I left my accountant’s office I felt this weird sensation on my face.  I think it was….wait…a smile?  This was huge considering the previous year I left feeling like I had just gotten run over by a truck.  The tax deductions you’re eligible to take for mortgage interest and property taxes greatly increase the financial benefits of homeownership. Here’s how it works.

Assume:

$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 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.

by Betsy Ballantyne (info provided by Realtor.com)

betsy@betsyballantyne.com