Tax Advantages

One of the most overlooked aspects of purchasing a new home is the tax advantages it offers.  The interest and property taxes you pay on your primary residence can usually be written off on your income taxes*.  By sheltering a large portion of your income from the IRS, you will be able to keep more of your monthly paycheck.  In other words, your reduced tax liability means less income taxes out of each check which means more cash flow from month to month. 

Often first time home buyers are concerned about the higher payments that a home loan requires.  But, if you take into account the tax advantages that come with home ownership, you may realize that you actually have more cash flow each month.  For example:
If you are currently earning $60,000 per year and paying $1,500 per month in rent in a 30% tax bracket your annual income tax liability is roughly $18,000.  Your $60,000 income minus $18,000 in taxes equals income of $42,000 per year or $3,500 per month in cash flow.  If you subtract your $1,500 rent, that leaves you with $2,000 cash flow after income taxes and rent. 

If you purchase a $400,000 home with 20% down at 6% interest, your loan payments will be $1,918 per month**.  This is $418 month higher than your rent.  However, due to the tax deductibility of interest on your primary residence, your tax liability will now be reduced by $5,760 the first year or $480 per month.  So, your cash flow is now improved because your income of $60,000 minus $13,440 in taxes equals $46,560 per year or $3,880 per month.  If you subtract $1,918 in mortgage payments, your cash flow is $1,962 per month.  This is basically the same figure as if you are renting!

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Speak With A Loan Originator 

Would you prefer to speak with a Loan Originator over the telephone?  Please call us directly at   1-800-276-CYOL(2965) and choose option 1.  Or, click here to have one of our experienced representatives contact you directly. 

*Consult a tax advisor.
** Principal and interest only.  Does not include tax and insurance.