# What Is the Tax Benefit of Owning a Home?

by Rob Seltzer, CPA, PFS

In 2010, my wife and I bought our first condominium in Thousand Oaks for \$210,000. How much will the tax write-off be since we now own a house? How much money does one get back at the end of the year for owning a home?

Unfortunately, you left out information that I need to give you an exact answer. I do not know how much your down payment was, or the interest rate on your loan or if you paid points. I also do not know your tax rate or taxable income. Finally, I do not know when you purchased your home, so I don’t know how many mortgage payments you made in 2010. I will assume that you made a typical 20 percent down payment of \$42,000. That would leave you with a loan amount of \$168,000. I will assume that you have an interest rate of 4.5 percent and paid one point and that the purchase was made exactly in the middle of the year, July 1, 2010. With those assumptions, your deductions will be as follows:
1.   The point fee paid of \$1,680
2.   Property taxes are approximately 1.25 percent. So that would be \$2,625 for the whole year and \$1,313 for the six months that you owned the home
3.   When you start making payments on a 30-year mortgage, your payments are mostly interest with very little principal getting paid. So based on the 4.5 percent interest rate and six months of interest, your deduction would be about \$3,780.

So to summarize your total deductions for 2010 based on the purchase of your new home would be \$1,680+\$1,313+\$3,780 or \$6,773. Now we must determine how much that deduction would save you. If your taxable income is above \$68,000, then your tax bracket is 25 percent. Your combined rate with the California rate would be about 33 percent. So the tax savings using my assumptions would be \$2,258. This number would be adjusted based on differences from my assumptions compared to your actual situation.

Rob Seltzer is principal of Robert Seltzer, CPA, PFS, in Beverly Hills. You can reach him at (310) 278-9944.

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