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Buy Vs Rent Tax Advantages: Here is some info that is really
good as gold!
…perhaps better still as gold value can fluctuate, whereas owning a home tax incentive will keep adding on as the years progress.
Renters have just one tax advantage –which, by the way is also extended to homebuyers: Part of the rent – as well as the homeowners, part of the mortgage can be deducted from income tax.
However homeowners enjoy other tax advantages, which combined, are of higher value:
Talking about buy Vs rent tax advantages - there is a program called ‘mortgage interest deduction’ [MID] that allows a home owner to deduct all amounts paid in interest for your home mortgage
It is good all through the years you are paying the mortgage ...up to the last penny you pay in interest to buy your home …all 30 years if you mortgage goes that long!
If you rent – even you go on renting for 30 years …40 years …50 years …all your life time! You will NEVER be able to deduct a single penny from the amounts you pay towards your rent …zero! Nothing! NEVER!
In the first few years of the mortgage the biggest chunk of your mortgage payments goes towards the interest...
But let it be known that those dollars are actually benefiting you to deduct – every single dollar paid in mortgage interest – from your gross income – through MID, so you actually will pay less income tax every year that you pay a home mortgage!
Each year your lender will send you the form 1098 that tells you how much interest you have paid in the previous year …it will be expressly marked which year the form refers to and it has to be used for that year only.
Usually it is mailed in January, however lenders can send it out as late as February – but no later …I do not remember ever receiving one passing January, but if does not reach you, call your lender …it even may be lost
…take that to your tax preparer – whatever figure you have received, it will be fully deducted from your gross income… sweet, hum?!
For more 'official" MID info please 'her from the horse's mouth' - I mean the IRS - Publication 936 MID Deductions
Some or most of your Property Tax – May be Deductible from Your Income Tax.
This is of the buy Vs rent tax advantages that is most 'hidden' from the public not many people know about it. Yet it can help a homebuyer enormously and, depending the value of your home it can be several thousand dollars in savings every year ...and it continues after the home is paid off.
Please click to read it straight from the horse’s mouth, I mean, from the IRS - Property Tax deduction
Here is another big item on the buy Vs rent tax advantages:
On my page case studies #1, I write one of my clients who, after paying rent in an apartment where he lived for 11 years straight, he decided that it was time to buy a home…
He walked from there with a mere ‘thank you’ from the complex..
…At the closing table, we met the sellers, a young couple – they had lived on the home they were selling for about 6 years – they walked from there with a nice check for over $60,000 :- )
I quite sure that they received back their initial down payment and whatever appreciation their home got over that period.
However the most important thing is that they lived in the home for half of the time the buyer had live in his apartment and they still manage to walk away with all that money…
Any homebuyer who resale a home after 2 years after acquiring it, will be able to keep any capital gains realized from the sale of his/her primary residence …try that with any other form of investment :- )
I am no tax specialist but as far as I know any capital gains that the seller makes from his/her primary residence is their tax free AND they can continue to repeat it because there is no limitation how many times they may sell ‘a primary residence’
…and there is no obligation to ‘reinvest’ to buy another residence right away as it once did.
Do you why there is no capital gains mention for renters on the tax code? …well, there is no capital gained for renters …ever! :- (
A home owner is allowed to deduct some of the home payments from his/her income tax.
This is a well-known fact so I will not extent myself much longer on this part, which, by the way, is also afforded to renters who have a home based business.
This is, perhaps, the only one of the buy Vs rent tax advantages benefit that renters can enjoy from their dwelling.
However, when you are a home owner, I think it is much sweeter that part of you income tax also goes towards moneys that will help offset your mortgage …in the long run it does help!
So, as I am trying to demonstrate on this page, how ownership is a gift that keeps on giving …in more than one ways.
As usual - I recommend that you do consult your tax adviser!
Knowledge Base - This series dedicated to explore the Buy Vs Rent quest is comprised by 8 intertwined articles. I recommend that you further your knowledge by reading all of them - enjoy …AND learn!
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JC Fagundes, RE Agent |SERVICE. EXPERIENCE. EXCELLENCE.