Do Tax Breaks Really Offset the Cost of Owning Your Own Home?

Purchasing a home is one of the most popular investment choices amongst modern American families. For many, rising property costs over the past two decades have made individuals who invested in property extremely wealthy. According to realtor Suzanne Carney, some of the main driving forces behind investing in property are the tax breaks given to homeowners that help offset some of the associated costs. But do these tax breaks really offset the true cost of owning your own home? In this article we will explore some of the different tax breaks available to you as a homeowner, and help you determine whether or not investing in property is the most advantageous investment decision you can make.


The mortgage interest deduction is the most commonly known tax break associated with home ownership. A married couple in the United States can deduct up to one million dollars in interest from their taxable income every year. If you are unmarried, you can deduct a maximum of $500,000 a year from your annual taxable income. This is not only applied to homes that you live in, the total can also be derived from investment properties you own within the United States. This is considered a primary driving force behind secondary home ownership in the United States.

Mortgage Insurance

Mortgage insurance is tax deductible if you are forced to take out mortgage insurance on any mortgage issued after 2006. But this tax benefit is related to your annual income. If you earn over six figures a year the tax benefit becomes increasingly smaller. You should only factor this mortgage insurance into your potential tax breaks if you earn less than $100,000 a year. If you’re receiving a VA or FHA government backed home loan, these tax breaks would not apply to you. VA and FHA loans do not require private mortgage insurance as they are backed by government programs that guarantee loans to the individual lender.

Property Taxes

Property taxes are another form of homeowner related tax that can be deducted from your income. While this is largely beneficial to homeowners, it must be said that in some regions property taxes are extremely high, and the tax offset doesn’t eliminate the full cost of these property taxes. For example, in Houston, Texas homeowners can expect to pay around 1.81 percent of their property value in property taxes annually. For someone with a million dollar home, this is over $18,000 in annual property tax – a hefty amount of money regardless of its tax deductible status. Remember, not everyone pays property taxes, most of California does not require residents to pay property tax on property they own in-state.


If your home is appreciating in value, tax breaks help to offset the costs of ownership. It is important to note that when something is tax deductible it is not simply a tax credit. A tax rebate would offset the entire cost of the tax, but a deductible simply reduces your taxable income. This is why there is still an associated cost with the taxes and other costs of owning your own home. This being said, owning a home means you are paying off your own mortgage, rather than somebody else’s. Aside from the associated costs with owning a home, you should also consider that owning property is always a risky investment. Property is often seen as a more stable alternative to other traditionally volatile investments (such as stocks), but as we saw in the subprime mortgage crisis, the housing market is capable of completely crashing as well. Make sure any investment decision you make is well informed and well researched — diversifying your portfolio is crucial in reducing your overall risk.

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