Because of deductions on mortgage interest and property taxes, the government is subsidizing your home purchase. I am a real estate agent, not a CPA, and tax issues should always be discussed with your accountant or CPA.

The mortgage interest you pay can be deducted from your gross income to reduce your taxable income. I have been provided this example:

You have a $300,000 mortgage at 6 percent interest; you pay $18,000 annually in interest. Assuming a 25% tax bracket, your taxable income for the year is reduced by $18,000 which equals a tax savings of $4,500 (25 percent of $18,000).

Property taxes may also be deducted from your gross income, further lowering your overall annual tax obligation. Property taxes in Los Angeles County are approximately 1.125% of the selling price.