Homeownership Benefits
One of the best justifications for owning a home, at least for financial reasons, is the tax savings that result from deducting mortgage interest and real estate property taxes. Under the current tax code, mortgage interest on first and second homes is generally deductible as long as these loans total less than $1.1 million.
To deduct property taxes and the interest paid on your mortgage, you must itemize deductions rather than take the standard deduction. For many homeowners, the combined deductions for mortgage interest and property taxes easily exceed the standard deduction.
As a home buyer, you may also be able to deduct fees charged by the lender and closing costs. Contact a tax advisor for details on how you can take advantage of homeownership tax savings.
Other advantages to buying a home include:
- Freedom to live the way you want to. You can customize your home without having to worry about the landlord’s rules.
- You can accumulate home equity. You can borrow against the equity built up in your home to finance necessities such as a college education, vacation, new car, etc. Since the interest on a mortgage is usually low, borrowing money against your home can be very sound. The interest on home equity loans is usually tax deductible, too.
- Stable monthly payments rather than rent payments which typically increase each year. The principal and interest portion of most mortgage payments remains unchanged for the entire repayment period so you know exactly what you’ll need in the way of finances.
- Home improvements that may increase the value of your home. And your home improvement costs may be used to reduce your capital gains tax when you sell.
- Houses typically increase in value over time.
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