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There are several tax breaks for homeowners, and the mortgage interest deduction is probably the most well-known. For taxpayers who use itemized deductions, tax-deductible mortgage interest can save big bucks on income taxes. Here's a calculator to determine your possible tax break, and what you need to know about this and other tax benefits for homeowners.

The mortgage interest deduction

The IRS allows homeowners to deduct the interest they pay on their mortgage each year. Specifically, the deduction allows for the interest on a mortgage amount of up to $1 million on a primary and/or secondary home to be taken as an itemized deduction.

This could amount to some serious savings over the term of your mortgage. For example, if you obtain a $200,000 mortgage at 4% interest, you could save $35,935 in taxes over the life of the loan if you're in the 25% tax bracket. Here's a calculator that can show your potential savings:

 

* Calculator is for estimation purposes only, and is not financial planning or advice. As with any tool, it is only as accurate as the assumptions it makes and the data it has, and should not be relied on as a substitute for a financial advisor or a tax professional.

Two other big tax breaks for homeowners

Another important thing to mention is that the mortgage interest deduction is just one of the tax breaks homeowners can take advantage of. Two other potentially lucrative deductions are for mortgage insurance and property taxes.

Mortgage insurance is technically a part of the mortgage interest deduction. If you put less than 20% down when buying a home, chances are that you'll have to pay mortgage insurance. For a conventional mortgage, you can drop mortgage insurance after your loan-to-value ratio drops to 80%, but for an FHA loan, it is there for as long as you have the mortgage.

Unlike the mortgage interest deduction, the mortgage insurance deduction has income limits. In order to deduct the full amount, your AGI must be less than $100,000 for most tax filing statuses, and the deduction disappears completely with AGI above $109,000.

Property taxes are another big deduction, and could potentially be the biggest tax benefit of homeownership if you live in a high-tax state. Like mortgage interest, this deduction isn't subject to income limitations.

These tax breaks are only usable if...

It's important to mention that all three of the deductions mentioned here can only be taken by taxpayers who itemize deductions. In other words, if your homeownership tax deductions combined with any other deductions are below the standard deduction ($6,300 for singles, $12,600 for married couples filing jointly), you won't get any benefit. And, even if you do itemize, your actual tax savings is limited to the amount by which your deductions exceed the standard deduction.

Since more than two-thirds of all taxpayers take the standard deduction, it's fair to say that not all homeowners will be able to take advantage of the tax benefits.

The bottom line

Owning a home can be great for a number of reasons (here are some of mine). However, it's important to remember that the tax benefits should only be a deciding factor if you'll actually be able to take advantage of them. Using the tax calculator in this article, combined with your estimated property taxes and mortgage insurance (if applicable), you should be able to get a good idea of whether or not buying a home will translate into tax savings for you.

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