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  Home Ownership AdvantagesSaturday, June 24th, 2017  


If you rent then all your housing expense goes to the landlord. No equity, just another month with a roof over your head. Reasons that make renting a good thing range from a job that demands constant moving to new locations, maintenance and other responsibilities for the property are born by the owner, or purchasing a home is an expense that is out of reach. If these renting advantages do not apply to you then looking into purchasing a home should be your next investment.

Buying a home can bring benefits other than just home ownership. Hopefully you are building future equity. Probably for the average family, home equity is the largest single investment towards retirement. Even if you plan to stay in your home after retiring, with the mortgage paid, your home will be the least expensive place you can live. There are only taxes to pay and the occasional repair. But that is the future, for the present, most of the immediate benefits center around tax breaks. Some of these typical deductions are:

Mortgage interest is the largest deduction for a new homeowner. This is especially true for the first years of owning a home where your mortgage payments are mostly interest. Interest is usually fully deductible. If you take out a mortgage for 30 years at 7 per cent interest, in the first year, for every thousand dollars of the loan, you will pay $70 in interest and $10 in principal. For a $100,000 house, that is a tax deductible amount of $7,000. For anyone already having to fill out a Schedule A, "Itemized Deductions" on your Federal income tax this is a powerful incentive for home ownership. If you now use the standard deduction, redo your last years taxes to see if you will save money. Don't forget the other tax breaks listed below. As a note, your mortgage holder is required to send you a Form 1098 each January for the prior tax year. The form will show exactly how much you paid in interest.

Points paid at closing on your new home are deductible if they are considered by the IRS as pre-paid interest. Of course the IRS has restrictions on what they think is pre-paid interest and all of the following must apply: The mortgage must be for your main residence (buying, building, or renovating), points and the number of points must be the norm for your area, points must be a percentage of the loan principal, and you must make a down payment (your own money) toward your home purchase at least equal to the points you were charged.

Property taxes actually paid during the taxable year are fully deductible on your income tax return. Usually your taxes are paid out of an escrow account. You will get receipts for each payment, and they will show in your yearly escrow account statement.




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