Don’t forget to take into account the

TYPICAL FEDERAL INCOME TAX SAVINGS

IN THE FIRST YEAR OF HOMEOWNERSHIP

BORROWER’S INCOME

MORTGAGE  AMOUNT         $40,000         $50,000        $60,000       $70,000     $80,000    ________________________________________________________________________

$ 40,000                                    990                 990               990              990          1,096

$60,000                                 1,485              1,485            1,485           1,485          1,644

$80,000                                 1,980              1,980            1,980           1,980          2,192

$100,000                                 2,475              2,475            2,475           2,475          2,740

$120,000                                 2,969              2,969            2,969           2,969          3,288

$140,000                                 3,464              3,464            3,464           3,464          3,835

$160,000                                 3,959              3,959            3,959           3,959          4,383

$180,000                                 4,454              4,454            4,454           4,454          4,931

$200,000                                 4,949              4,949            4,949           4,949          5,479

This table shows the typical reduction in federal income tax that a home owner would

receive in the first year of homeownership.  For instance, a home owner with an income

of $50,000 and a mortgage amount of $120,000 would pay $2,969 less in federal taxes

because mortgage interest and real estate taxes can be deducted.  Most states follow the

federal tax calculation, and home owners would also see a reduction in their state income

tax, but state tax reductions are not included here.

Under tax code changes enacted in 1997, mortgage interest rates and property taxes remain deductible, and profits of up to $500,000 on the sale of a principal residence are excluded from tax on capital gains.  In contrast, stock dividends are subject to income tax, and profits on the sale of stocks, bonds and other investments are subject to a 20 percent federal tax rate for investors.

A borrower looking at a mortgage amount of $160,000 with an annual income of $50,000 would be typically looking at an annual tax savings of $3,959.  That equates to: