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The Advantages of Buying a Home
作者:DMVRealtor
发表时间:2019-02-15
更新时间:2019-02-15
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Number 1: Home ownership offers tremendous financial benefits.
Your home is likely the biggest investment you will ever make!
As such, it can significantly build your wealth over time.
Making that monthly mortgage payment creates equity (vs. paying
rent to build up your landlord’s). Though real estate values
may fluctuate, over the long haul, buying your home is always a
solid investment.

Number 2: Homeownership serves as a good hedge against
inflation. With a fixed rate mortgage, you are guaranteed to
pay that rate, despite what may happen to the economy. Even
adjustable rate mortgages cap how much and how often the
interest rate and/or payments can vary in a year and through
the entire mortgage period.

Number 3: You can rent out a portion of your home or property
for gain. It actually goes further than just renting out a
spare bedroom or basement in-law room. Some people rent out
their driveway for commuters who need a parking space or even
patches of their backyard for those who want to grow a garden
but don’t have the acreage for it. There are countless ways
that you can make your house and surrounding property “work”
for you by offering alternate income streams.

Number 4: You have more control over your energy bill. Owning
your home means that you have more control over your energy
costs. While renters can sometimes control the heat and air-
conditioning (but not always), owners have the ability to
upgrade their heating and cooling systems, add insulation,
install solar panels and more to make their home more energy
efficient. Having maximum control over these aspects of your
home allows you to save more money on your energy bill.

Number 5: You can alter your home how you choose when you’re a
homeowner, you don’t have a landlord dictating what you can and
cannot do with your space. You can paint, change the flooring,
add cabinetry and more. You can even install upgrades that will
make your home go up in value when the time comes to sell.

Number 6: You can reap the rewards of appreciation. Every year
that you own your home, it gains appreciation. The best part
about investing in a home is that the appreciation applies to
the total cost of the house, not just the amount that you put
down. By contrast, when you invest in stocks, you only gain
interest on the amount of money you put in. Homeowners reap
the rewards of the appreciation accrued on the total cost of
the house. And when it comes time to sell, your earnings are
tax exempt (for primary residential homes).

Number 7: You don’t suffer from unfair rent hikes. If you
secure yourself a fixed-rate mortgage, you won’t be burdened by
hikes in your monthly mortgage payments. However, renters have
to face yearly increases in their rent. Sometimes, landlords
are only allowed to increase it by a certain percentage in
certain hot markets. However, there’s no telling what kind of
increases landlords will make in their tenants’ monthly rents
in areas of high demand.

Number 8: You gain tax incentives. Homeowners have the added
advantage of tax deductions on mortgage interest and property
taxes. These deductions alone can make it actually less
expensive to own a home versus renting one when you break it
down into monthly expenses. And don’t forget the aforementioned
tax-exempt earnings when you sell your home. The most
important of the financial advantages of home ownership are its
tax benefits. There are quite a few! We will break down the
main ones for you here. Keep in mind, to take advantage of
them, you will need to itemize your deductions and consult with
a financial professional or tax advisor.

The Big One: Mortgage Interest is a Tax Deduction. The best
tax break of home ownership is being able to deduct your
mortgage interest from your federal income tax return. You can
deduct interest on up to $750,000 of your home mortgage amount.

For the first few years you own your home, the interest portion
of the payment is roughly ⅔ of your monthly mortgage, which can
translate into a significant tax break and cut down on what you
owe Uncle Sam every April. For example, if you have a $500,000,
30-year mortgage at a fixed rate of 4%, you will enjoy a tax
savings of $4,960 in your first year (assuming you’re in the
25% tax bracket). Over the life of the loan, you will save
$89,837 in taxes!

The Runner Up: Capital Gains Protection. Tax law also allows
you to shelter a large amount of profit you make when you are
ready to sell your home. If you’re married filing jointly,
$500,000 of your capital gains are sheltered; $250,000 for
single homeowners. FYI: your gain is actually your home’s
selling price, minus deductible closing costs, selling costs,
and your tax basis in the property. So be sure to include the
commission you pay, title insurance, any fees (legal,
inspection, etc) and money spent prepping the house for sale
when calculating your gain.

For example, suppose you are a single woman selling a condo you
bought ten years ago for $350,000. The closing price is
$650,000. You spent $50,000 in fees, commissions, and getting
the condo ready for sale. You may think you had maxed out your
$250,000 shelter with the sales price, with the closing and
selling costs, you might owe no capital gains tax at all!

Of course, certain conditions must be met: You owned the home
for at least two years in the five years before the sale; the
home was your primary residence for a total of at least two
years of that same period; and you did not exclude these gains
from another home sale in the two years before the sale.

More tax breaks for your federal return:
Points are Deductible Too
Points, or discount points, are fees paid directly to the
lender at closing in exchange for a reduced interest rate. A
point is equal to 1% of the loan amount. For example, the value
of a point on a $250,000 mortgage would be $2,500. The points
paid to ensure a loan rate are tax deductible, as long as the
you as the buyer pay them (vs. the seller.) Also, the cash for
your down payment must equal to any points paid. Be sure to
deduct the points within the year that you bought the home.

As Are Your Property Taxes. Your annual property taxes are a
deduction for as long as you own your home up to $10,000. These
local taxes are based upon the assessed value of your home. The
more your home is worth, the higher your property tax bill.
Fortunately, property taxes are deductible from your federal
income taxes. You will pay your taxes either through an escrow
account with your lender or directly to the municipality. Check
your records to determine this amount and deduct away!

Do You Pay PMI? Deduct Those Premiums. For mortgages issued in
2007 or later, home buyers can deduct the premiums paid for
Private Mortgage Insurance, or PMI. You may be asking, “What
is PMI?” If you have a mortgage but didn’t have a 20%+ down
payment, your lender will require the mortgage be insured. Many
lenders offer programs with just 10-15% down, so we see this
scenario quite often. Yes, PMI is another cost, but the good
news is that those premiums can be deducted, so long as your
income is less than $100,000.

FHA, VA, and the Rural Housing Service loans also require
insurance. Some of those premiums are deductible as well. These
loans are more complex, so plan to consult a professional to
take advantage of these deductions.

First Time Buyer Special. First-time home buyers often tap
into their IRAs for the down payment for their first home.
Normally, the IRS charges a 10% penalty for pre-age 59½
withdrawals, but not in this case. Homebuyers can use up to
$10,000 ($20,000 for a married couple) of IRA funds toward the
purchase of a first home.

The best news? You don’t have to be purchasing your very first
home to take advantage of this option. Technically, as long as
you (or your spouse) didn’t own a principal residence during
the previous two years, you qualify. Feeling generous? You can
take advantage of this option for a child, grandchild, or a
parent.

You must use these IRA funds within 120 days of withdrawal. So
act quickly when using this option. Also, know that these funds
will be taxed in your top bracket.

Save Those Home Depot Receipts: Save receipts and records for
all improvements you make to your home. In tax-speak, a home
improvement project substantially adds to the value of your
home, increases its useful life, or adapts it to new uses.
Think of additions, remodeled kitchens and bathrooms, decks and
fencing, landscaping, electric and plumbing upgrades, and new
roofs. While you can’t deduct these costs now, when you sell
your home, they are added to the purchase price of your home.
This new number is the “cost basis” of your home for tax
purposes, or in lay terms, the amount of your investment in
your home. The greater your basis, the less profit (see capital
gains section above) you’ll receive when you sell your home,
which translates to a lower tax bill when you do sell.

Go Green & Save. Energy-saving home improvements can earn you
an additional tax break in the form of an energy tax credit
worth up to $500. A tax credit is more valuable than a tax
deduction because a credit reduces your tax bill dollar-for-
dollar. Click here to learn more about these types of credits
(this opportunity only applies to your primary residence).

The Bottom Line – To Summarize: Buying a home is almost always
a wise financial decision. It offers tremendous financial
benefits, most notably on the tax front. Of course, these are
just the basics. Keep in mind that laws and regulations change
frequently. If you’re taking the plunge into homeownership, get
in touch today and I’ll help you scout out great properties in
your area.

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