The tax deductions you can take for mortgage interest and property taxes greatly increase the financial benefits of home ownership. Here's how it works.
$9,877 = Mortgage interest paid (a loan of $150,000 for 30 years, at 7 percent, using year-five interest)
$2,700 = Property taxes (at 1.5 percent on $180,000 assessed value
$12,577 = Total deduction
$3,521.56 = Amount you have lowered your federal income tax (at 28 percent tax rate)
(12,577 X .28 = $3,521.56)
Note that mortgage interest may not be deductible on loans over $1.1 million. In addition, deductions are decreased when total income reaches a certain level.