Tax Advantages Of Owning A Home vs. Renting
People buy homes for all types of reasons. The most common reasons I hear from homebuyers is independence, building a future, having something that I own and financial freedom. All of those are wonderful reasons to buy a home but there's one that gets overlooked more often. That's the financial aspect of it from a tax perspective.
When you own a home depending on your tax situation, you can typically write off all of the interest you paid that year on your home loan and your property taxes. That can turn into some real savings for people. To illustrate this point let's use an example. If you make $60,000 a year which I believe is the average income for an American household, and you pay close to $10,000 in interest as well as your property taxes, those are itemized deductions the government allows you to take. Now you are paying on $50,000 worth of taxable income and not $60,000. Depending on the tax bracket you're in that's a considerable savings.
The other piece is let's say you purchase a townhome and the cost is around $1200 a month and a payment. If you are renting that same townhome perhaps the rent would be $1400 per month. When you average the savings you make per year from your tax deduction and divided by 12, your true payment of owning that home could be $1000 a month. Which makes owning a home even more attractive.
As always with any type of financial information, please consult your accountant, tax advisor and your attorney to get accurate numbers and information regarding what you're tax status and itemized deductions can be. This blog is intended to just get you thinking about even more value in owning a home.
Renting is a trap that some people never get out of. Take it from someone who owns a home, there's nothing like the feeling of having something that your own. Not to mention when you do get to the point where you retire, the home will be paid off and you won't have to worry about the rent increasing.
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