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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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