How can buying a home help with your income taxes?

Answer 1

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.