The federal tax credit ended on April 30th. The California state tax credit incentive has filled up its allocated budget and has stopped accepting applications since Aug. 15th. Both of these tax incentives were intended to boost home buying in order to get the economy back on track.

Now that these programs have closed, are there still any tax benefits to buying a home?

The answer is a resounding YES! Don’t forget that the American dream of owning a home brings along with it a load of tax deductions, especially if you take out a mortgage to purchase your home.

Property taxes. Real estate property taxes paid for a primary home or vacation home are deductable for income tax purposes. In California, specifically in Alameda county, the tax rate varies from 1.2% -  1.5% of the purchase price for the first year.

Mortgage interest. Every month that you make your mortgage payment, a part of that goes towards interest on your loan. This is the amount deductible in your income tax. You will need to itemize your deductions on your federal income taxes to take advantage of this. Also, this deduction is now allowed on loan over $1.1 million.

So, how do these tax deductions translate into actual savings to the homeowner? Let’s look at the following example.

Purchase Price: $200,000
Loan amount: $180,000
Mortgage interest: 5% fixed, 30-yr term

$8,939.69  =  Mortgage interest paid in 12 months
$3,000.00  =  Property taxes (at 1.5 percent on $200,000 assessed value)
$11,939.69 = Total deduction

Then, multiply your total deduction by your tax rate.

For example, at a 28 percent tax rate: 11,939.69 x 0.28 = $3,343.11

$3,343.11 = Amount you have lowered your federal income tax (at 28 percent tax rate)

In addition to mortgage and real estate property tax deductions, there is more. When you purchase a home, you are allowed a one-time tax deduction of the mortgage points you paid at closing. For example, one point means 1% of the loan amount, and you can deduct this amount on the year you purchase your home. As with mortgage interest, you will need to itemize your deductions to realize this tax savings.

So, is there life after the federal and state tax incentives? The huge financial benefits have always been there.