How can buying a home help with your income taxes?
The interest you pay when you buy home is an itemized deduction
on your tax return. As long as the interest and your other itemized
deductions exceed the standard deduction, they reduce your taxable
income, so you pay less income tax. The property taxes you pay are
also generally deductible. The gain on the increases in value
(ignoring some million $ exceptions) gets virtual tax free
treatment on sale. As noted above: The interest expense, which is
actually not on the home but on the mortgage that is secured by the
primary home, is deductible. (Of course, there is a true expense to
that also). Frequently, having made the threshold for itemizing
deductions, (by incurring the interest), allows someone to start
itemizing and deducting other items they wouldn't have been able to
before. On the other hand, the standard deduction was a "give me"
in determining taxable income, and your only going to benefit by
the amount above it that you can itemize.