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Income Tax Savings
Because of income tax
deductions, the government is basically subsidizing your purchase of a
home. All of the interest and property taxes you pay in a given year can
be deducted from your gross income to reduce your taxable income.
For example, assume
your initial loan balance is $150,000 with an interest rate of eight
percent. During the first year you would pay $9969.27 in interest. If
your first payment is January 1st, your taxable income would
be almost $10,000 less – due to the IRS interest rate deduction.
Property taxes are
deductible, too. Whatever property taxes you pay in a given year may also
be deducted from your gross income, lowering your tax obligation.
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