When personal income tax is declared as zero, buyers can maximize purchasing power by leveraging tax-free income to allocate more funds toward mortgage payments. Key strategies include prioritizing fixed-rate mortgages to avoid interest rate volatility, utilizing tax-advantaged accounts like retirement savings for down payments, and targeting states with no state income tax to further reduce liabilities. Engaging a tax attorney is critical to ensure compliance with IRS regulations and avoid penalties for improperly declaring zero income.

The rationale hinges on the interplay between disposable income and housing affordability. In the U.S., personal income tax typically represents 12-15% of earnings, depending on filing status and income level (Tax Policy Center, 2023). By eliminating this deduction, buyers effectively retain 100% of their pre-tax income for housing expenses. For example, a household earning $100,000 annually could allocate $12,000-$15,000 annually to mortgage payments without income tax deductions, compared to $8,400-$10,500 after standard 15% tax withholding (IRS, 2022). However, declaring zero income tax may trigger audits if inconsistent with employment or business documentation. State-level variations also matter: nine states (e.g., Florida, Texas) have no state income tax, reducing total tax burdens by an average of 7.3% (Wolff, 2021). Combining federal tax neutrality with state exemptions optimizes affordability. Additionally, mortgage interest deductions remain valuable, as they reduce taxable income by up to $10,000 annually (IRS, 2023), even if personal income tax is zero. This creates a dual benefit: lower taxable income from deductions and higher post-tax savings for down payments. Data from the National Association of Realtors (2023) shows that buyers in no-income-tax states spend 18% less on housing than those in high-tax states, a disparity amplified when federal income taxes are minimized. Ultimately, declaring zero income tax requires meticulous record-keeping and professional advice to balance compliance with financial gains.