Tax Benefits
Vladimir is a single, childless guy who rents a house for $1200 a month. His adjusted gross annual income is $128,000. He has $3500 state income tax withheld from his paychecks during the year and qualifies for no itemized deductions. His federal income tax liability for the year:
Adjusted gross income: $128,000
Standard deduction: single $4400
Personal exemption $2800
Taxable income $120,800
Vladimir's 2008 federal income tax: $32,129. Ouch! That’s a lot of Wii games!
But if Vladimir buys a house with a mortgage payment of $1200 per month, everything changes:
Adjusted gross income $128,000
Itemized deduction for state income taxes: $3500
Itemized deduction for real estate taxes: $1500
Itemized deduction for mortgage interest: $11,400
Personal exemption $2800
=taxable income: $108,800
=Vladimir’s federal income tax: $28,409. He just saved almost $4000 by buying a house instead of paying rent.
**This is just a hypothesized scenario** Certainly buying a home has huge benefits not only because of the mortgage but also with other items that you need to fix. Have at home business?? There is a deduction for using your office space too!! Tax season is upon us, so wouldn't you like to write your home purchase off next year?? Call me or email me to see what possibilities you have at getting in on the tax break, I'd love to help!