The decision to own a home after years of renting brings many changes—suddenly you’re responsible for repairs, you can paint the walls any color you want, and you’re building equity instead of paying a landlord. But there’s another change that catches many first-time shoppers off guard: Tax season looks different.
As a renter, filing taxes is straightforward. You take the standard deduction, claim your income, and you’re done. As a homeowner, you suddenly have access to deductions that renters don’t—mortgage interest and property taxes that can lower your tax bill, as well as other breaks like energy-saving tax credits.
These tax benefits are just one piece of the homeowner’s financial picture. When you add in building equity and home appreciation, the path to building wealth looks different than renting. But does it beat the trick many young people swear by: affordable rent and investing the difference in the stock market?
What landlords get that tenants don’t
The tax code treats landlords and tenants differently. If you rent, your housing costs are just that—costs.
“Your rent has no effect on your personal taxes,” it said Spencer Carrollcertified public accountant and account manager at Gelt. “Whatever you pay in rent, whatever you pay in utilities—they’re just costs, unfortunately, that you pay to live your life.”
Homeowners can deduct two major expenses: mortgage interest and property taxes. On a $500,000 home with a 20% down payment and a 6% interest rate, you’ll pay about $24,000 in interest in the first year. Property taxes can add another $6,000 to $10,000 depending on where you live.
The catch: Not all homeowners benefit. To claim this deduction, you need to do things instead of taking the standard deduction—$15,750 for single filers and $31,500 for married couples filing jointly in 2026. If your mortgage interest and property taxes don’t exceed those limits, the standard deduction is better.
For example, a single consumer with $30,000 in mortgage interest and $8,000 in property taxes would have $38,000 in deductions—$7,500 more than the average. For the 24% tax bracket, that saves about $1,920 in federal taxes every year, or about $160 a month.
That’s real money that lowers your monthly mortgage costs—but it shouldn’t be the deciding factor in whether you buy. Carroll puts it in perspective: “If you spend another $10,000 on a mortgage, you get 20 to 37 cents back on every dollar. It’s not like you get to deduct all of that from your actual tax bill—it’s just a fraction of it.”
Doing the math in 10 years of renting versus buying
To really understand the rent vs. buy debate, you need to look beyond the tax breaks and use the real numbers. Let’s go through the actual situation with Barbara Gretschreal estate agent at Berkshire Hathaway HomeServices EWM Realty. Let’s consider a hypothetical 30-year-old earning $85,000 choosing between buying a $500,000 home or continuing to rent for $2,500 a month.
“Landlords often think that the entire mortgage payment is a ‘cost,’ when in fact, only interest, taxes, insurance, and maintenance are costs,” Gretsch explains. “The main part of the payment is creating equity and forcing savings.”
Our buyer puts 20% down ($100,000) on the home, leaving a $400,000 loan at 6% interest. In the first year, they’ll pay about $24,000 in mortgage interest and another $6,000 in property taxes—a total of $30,000 in potential deductions. “This still exceeds the standard deduction and can result in $3,500 to $4,000 in federal tax savings,” Gretsch noted. “Although the tax benefit is slightly lower with a higher down payment, the buyer benefits from no PMI and lower monthly payments.” Meanwhile, the tenant pays $30,000 in rent that year with no tax deductions and no equity building.
Fast forward 10 years. The homeowner paid about $50,000 to $60,000 in principal—although most of that happened in later years as the interest covered the lower payment. Assuming 3% annual appreciation, the home is now worth about $672,000. Between the principal payment and the bonus, that’s about $222,000 in equity. Add in those tax savings invested over the years, and you’re looking at about $260,000 in total net home value.
A tenant who invested $100,000 in a down payment and the monthly difference between the rent and the mortgage payment would be $215,000, assuming they stick to the investment and rent calculation plan over time. The homeowner is out about $45,000 up front—and that’s assuming the renter is motivated enough to make the monthly investment.
But a note on that “forced saving” concept: It only works for people who live in their homes for a long time.
“Some people don’t realize that the monthly mortgage payment for seven to 10 years is a lot of interest, taxes and insurance,” Carroll said. “The principal you pay him, which is your money, is very small at first.” That means you shouldn’t buy a home expecting to build significant wealth through mortgage payments in just a few years—it’s a long-term strategy.
Don’t forget to check the original
These figures assume perfect conditions on both sides, but real life is often worse than that.
Homeowners face expenses that don’t show up in the monthly mortgage payment. A new roof, broken HVAC system, or leaking foundation can cost thousands with little warning. Most experts recommend budgeting 1% to 2% of your home’s value per year for maintenance and repairs—for a $500,000 home, that’s $5,000 to $10,000 per year. Then there are the HOA fees if you’re in a condo or master-planned community, which can add up to hundreds more every month.
Employers have their own hidden costs. Rents aren’t always low—they often go up 3% to 5% a year, sometimes more in hot markets. Moving costs add up when you move every few years. And there’s the biggest wild card of all: Are renters really investing what they’ve saved in housing costs?
“I think the sad truth is probably too often, people don’t make the difference,” Carroll said. It’s easy to plan to invest more money each month, but in reality that money often goes into lifestyle expenses. Without the enforced discipline of the mortgage payment, many renters never build the investment portfolio they intended to build.
The numbers show homeownership can be financially viable over a 10-year period, but the margin isn’t as dramatic as many people think—and it depends a lot on your specific situation and market conditions. Tax breaks help, but they are not the driving force behind homeowner wealth building. That comes largely from appreciation and, ultimately, equity building.
“You have to make a housing decision based on your lifestyle and your family’s needs and make sure you can afford it,” Carroll said. “I personally will not contribute to the tax deduction if I think I can or not.”
