ReckonBoxWhen buying overtakes renting
The break-even is the year the buyer's net worth passes the renter's, once appreciation, equity, selling costs, and the return the renter earns on invested cash are all counted. Before that year, renting comes out ahead; after it, buying does. It moves around a lot with the assumptions, which is why a single "buy after 3 to 5 years" rule of thumb is close to useless.
On a $420,000 home with 20% down at 6.55%, 3% appreciation and a 6% investment return, that crossover is 15 years 8 months out. Stay 7 years and renting is ahead by $32,368. None of those inputs is extreme, so buying is not automatically the answer, and the honest arithmetic often says wait.
The tax break most calculators invent
The mortgage-interest deduction only saves you money if your itemized deductions beat the standard deduction, which per IRS Topic 501 is the larger of the two you take. Almost no rent-vs-buy calculator checks this. NerdWallet states outright that it assumes buyers itemize. calculator.net calls mortgage interest tax-deductible and leaves it there. mortgagecalculator.org tells you to enter a zero tax rate yourself if you take the standard deduction, and cites 2025 figures to boot.
Run the default loan. First-year mortgage interest plus 1.1% property tax comes to $26,518. The 2026 standard deduction for a married couple filing jointly is $32,200, per the Tax Foundation. So the itemized total is $5,682 short of the standard deduction, and the mortgage-interest deduction is worth precisely nothing.
| The mortgage tax benefit, year one | |
|---|---|
| Itemizable: interest plus property tax | $26,518 |
| Standard deduction (2026, married filing jointly) | $32,200 |
| Real tax benefit | $0 |
| What a calculator assuming itemizing credits | $6,364 |
A $6,364 annual benefit invented from nothing, handed to the buying side of the comparison every year, moves the break-even earlier and can flip the verdict. This tool credits only the excess of itemized deductions over the standard deduction, and shows you the naive figure alongside, so you can see the size of the fiction.
The error doesn't vanish when you do itemize
Suppose you have $20,000 of other itemized deductions, mostly state income tax and charity. Now the itemized total is $46,518, comfortably over the standard deduction.
The benefit still isn't the whole deduction. You'd have taken the $32,200 standard deduction anyway, so only the $14,318 above it is new, and at a 24% marginal rate that's worth $3,436. A calculator crediting the full mortgage interest and property tax still books $6,364, nearly double, because it never subtracts the deduction you already had. High-tax states don't escape this: the SALT cap holds the property-tax and state-tax portion to $40,000 for 2026, keeping the itemized total down.
The lever nobody talks about enough
Appreciation gets the attention, but the assumed investment return is nearly as strong, and it pushes the other way. A renter doesn't just avoid a mortgage. They keep the down payment and any monthly savings invested.
Raise the assumed return from 6% to 12% and the break-even slides years later or leaves the horizon entirely, because that money compounds faster than the home builds equity. Drop it to 2% and buying looks far better. The honest reading is that rent-vs-buy is partly a bet on the stock market versus the housing market, and the calculator can only run the numbers you feed it.
Where the numbers come from
Both paths run month by month. The buyer's net worth is home value less loan balance less selling costs, plus any side savings. The renter's net worth starts with the down payment and closing cash they never spent, invested at the assumed return, and each month the cheaper party banks the difference between the two housing costs. The break-even is the first month the buyer figure catches the renter figure.
The tax line is the itemizable total, mortgage interest plus SALT-capped property and state tax, less the standard deduction for the filing status, times the marginal rate, floored at zero. The 2026 standard deductions are $16,100 single, $32,200 joint and $24,150 head of household.
What this does not decide for you
The two inputs that move the answer most, appreciation and investment return, are guesses about the future, and anyone who tells you they know either number is guessing too. A break-even also ignores everything that isn't money: whether you want to own, how likely you are to move for work, and what a forced sale in a down market would cost. Rent-controlled housing, an unusually good or bad lease, and a job that might relocate you all sit outside this model. Treat the figure as one input among several, and talk to a qualified financial professional about your own situation.
Frequently asked questions
When does buying beat renting? Buying beats renting at the break-even point, the year the buyer net worth overtakes the renter net worth once appreciation, equity, selling costs and the return the renter earns on invested cash are all counted. On the default $420,000 home with 20% down at 6.55% and a 6% investment return, that point is 15 years 8 months out, so at a 7-year horizon renting is ahead by $32,368.
Does the mortgage interest deduction actually save me money? Only if your itemized deductions exceed the standard deduction, which per IRS Topic 501 is the larger of the two you take. On the default loan, first-year mortgage interest plus property tax is $26,518, below the $32,200 standard deduction for a married couple filing jointly, so the deduction is worth nothing. A calculator that assumes you itemize would still credit about $6,364 a year.
Why do other rent vs buy calculators overstate the tax benefit? Because they assume the buyer itemizes without checking. NerdWallet states it assumes buyers save by itemizing, calculator.net calls mortgage interest tax-deductible flatly, and mortgagecalculator.org tells you to zero out your tax rate yourself if you take the standard deduction. This tool runs that check and credits only the excess of itemized deductions over the standard deduction.
What is the 2026 standard deduction? For tax year 2026 the standard deduction is $16,100 for single filers, $32,200 for married filing jointly and $24,150 for head of household, per the Tax Foundation, a rise of $350 and $700 over 2025. The SALT cap that limits the deductible property-tax portion is $40,000 through 2029.
How does the investment return change the answer? It is the strongest lever after appreciation, because a renter invests the down payment and any monthly savings. Raising the assumed return from 6% to 12% pushes the break-even years later or removes it entirely within a normal horizon, since the renter money compounds faster than the home builds equity.
What does the break-even actually compare? Net worth on each path, month by month. The buyer net worth is home value less the loan balance less selling costs, plus any side savings. The renter net worth is the down payment and closing cash they never spent, invested at your assumed return, plus each month the cheaper party banks the difference. The first month the buyer figure catches the renter figure is the break-even.
Is this advice on whether to buy? No. It is arithmetic on the assumptions you enter, and the two biggest ones, appreciation and investment return, are guesses about the future that nobody can make reliably. A break-even also says nothing about wanting to own, job mobility or the cost of a move, so treat the number as one input and speak to a qualified professional about your own situation.