There are significant income tax benefits to owning a home. The Internal Revenue Code allows you to deduct all interest you pay on your mortgage from your personal income. The tax savings you receive will be in line with the rate of federal income taxes you pay on your income. For example, if you pay a tax rate of 20% in income taxes, you will save 20% of the annual interest you pay on your mortgage. Let’s say the total interest you pay annually on your mortgage is $9,600, and your average tax rate is 20%. That means you will save $9,600 X 0.20 = $1,920. Also, you do not have to wait until you file your taxes to get a refund of that money. You can adjust the IRS Form W-4 with your employer at any time. You will add additional deductions on the W-4 so that less income tax is withheld every pay period. This improves your cash flow and helps with the monthly mortgage payment. The ability to deduct the interest on your mortgage payments is a significant subsidy for American homeowners. This tax savings does not exist in many other countries.
Introduction
0/1
Your First Big Job: How to Get It
0/14
Flourishing in Your Job and Well-Being in Your Life
0/13
The Importance of Behavioral Economics
0/8
What is Money?
0/13
Analyzing Your Current Financial Situation
0/3
Budgets and Saving
0/13
Credit Cards, Auto Loans, and Other Personal Debt
0/18
Student Loans
0/11
Understanding the Time Value of Money
0/7
Banks and Financial Institutions
0/18
Buying a Home
0/24
Insurance: What Do You Need?
0/14
Investing Fundamentals
0/24
Investing in Mutual Funds
0/14
Saving for Retirement
0/9
Fiscal Policy and Monetary Policy-Government Intervention in Your Life
0/17