What are the tax benefits of owning a home? This is very important to understand, and should be factored in when figuring out how much of a mortgage payment you can manage. Renting a home doesn’t give any tax relief, but owning a home does. The interest that you pay the lender during the year is a tax write off. So are the property taxes. This doesn’t mean that you get a dollar for dollar relief on your tax burden. The amount of deductions will lessen the income that you have to pay taxes on.  As a rule of thumb, estimate how much you anticipate paying in interest and taxes per year, based on the size loan you think you will qualify for, current interest rates, and an estimate of property taxes for the area you intend on buying in. Divide this number by 12 and this will give you the deduction monthly. Then prepare a budget to determine how much rent you feel you can handle. Add to this about 18% of the monthly tax write offs of owning a home. This will give you a comparison of rent versus mortgage payment affordability. Remember, however, that having a relief on your tax burden doesn’t put more net income into your pay check. To do this you will need to file an amended W-4 form with your employer. Ask your HR department or your accountant how many more deductions you should claim on this form to increase your net income by the monthly tax benefit. Also, not everyone is in the same tax bracket, and the deduction will actually be based on the top tax bracket of your income. Low income borrowers might only see a 12% benefit. High income borrowers might see a benefit as high as 28%. Use the 18% figure as an estimate, for budgeting reasons.