Owning your own home is part of the American dream. But according to a recent Wall Street Journal article, owning a home is not always the best idea.

Some Americans who cashed in on the $8,000 first-time home buyers credit before it expired in April 2010 got a bad deal. The credit pushed up sales prices, which then dropped dramatically when the buying frenzy ended. The WSJ article states that the median home value has fallen by $15,000 from 2010 to 2011.

So is it better to rent a home than buy? That’s not always the case, either. Did those people whose home values dropped by $15,000 really lose out? Let’s look at the tax benefits for a residential homeowner.

Consider a Midwestern family of four who bought a three-bedroom house they could afford. Suppose they got a thirty-year, $200,000 loan with 4.5 percent interest, for a monthly payment of $1,015. Add in an estimated average property tax of $1,625 and insurance of $1,200 per year, and the total annual lodging expense would be around $15,000—or $1,250 per month.

In this scenario, $13,500 worth of mortgage interest and property taxes would be deductible. Folks in a combined federal and state tax bracket of 30 percent would save $337.50 per month. After taxes, that home would cost them $912.50 per month.

How much would a similar home cost to rent? Looking at the area around Chicago, Ill., we can find two- to three-bedroom homes available for around $1,500 per month. Taking into consideration the tax benefits for homeowners, renting a home would have cost the family $7,000 more per year than owning one.

Even after a drop in value within the first year, the family came out just about even between renting and buying. Families who buy homes they can afford tend to stay in those homes for a decade or more. In the long run, the prices rise, and the loan balance declines. When they get ready to sell in ten to thirty years, they walk away with a profit.

People who select homes where the monthly mortgage, property tax, and insurance payments are no more than 15–30 percent more than their rent will always fare well in the long run.

What If You Have a Home Office?

If you have an office in your home, things get a little more complicated. In fact, in this situation, sometimes you’re better off renting a home than being a homeowner. Why?

As a renter, you don’t have to deal with depreciation or the complicated calculations related to the taxable part of the profit when you sell the house. You simply deduct the business portion of the rent, utilities, insurance, and any other relevant costs.

As a homeowner, you get the full deduction for the mortgage interest and property taxes, even without using the house for business. So what else do you get to deduct? You get to deduct the business percentage of the utilities, maintenance, insurance, and association dues or maintenance fees.

The typical additional deductible expenses amount to about $1,500 for a business using about 20 percent of a home. Using the same federal and state tax rate of 30 percent, the additional tax savings for the homeowner’s home office is about $500 per year. When your business shows a loss, you might have to suspend that deduction and save it for future years.

So—Rent or Buy?

The answer is different for every family, in every market. With interest rates the lowest they’ve been in generations, it’s certainly worth seeking a home to buy.

Eva Rosenberg, EA is the publisher of TaxMama.com, where your tax questions are answered. Eva is the author of several books and ebooks, including Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com.