“A man complained that [on] his way home to dinner he had every day to pass through that long field of his neighbor’s. I advised him to buy it, and it would never seem long again.” -Ralph Waldo Emerson
Ownership of real estate can provide a place to truly call your own as well as a way to provide a good neighborhood for your kids to grow up in, and freedom from the whims of your landlord. Yet some of the biggest advantages of owning a home are less romantic and more practical – in fact, there are wonderful financial advantages to owning a home:
- Tax Deductibility You can deduct the cost of your mortgage loan interest from your state and federal income taxes. Since interest generally will account for most of your payment during the first half of your mortgage, the savings can be significant. Some of your costs at the time of closing (including prepaid mortgage interest) can be taken as deductions on that year’s income tax return, and points paid up front at the time of closing represent additional mortgage interest and may be taken as a deduction. In addition, you can deduct all of the property taxes you pay as well.
- Appreciation Potential Real estate is considered a good long-term investment because it usually appreciates in value especially given where values are in some markets today. The effects of borrowing potential can also increase as the value of the home appreciates.
- Capital Gains Exclusion When it’s time to sell your home the amount of capital gains you have to pay is reduced. A homeowner can exclude up to $500,000 per couple if married and filing jointly, or $250,000 if single or filing separately for homes that have been the taxpayer’s principal residence for the previous two years.
- Capital Gain Treatment Congress allows preferential tax treatment on gains from capital assets held for more than one year. This would be important for a homeowner who has gains in excess of the allowable exclusion.
- Personal Enjoyment Pride of ownership is a valid reason for wanting to own a home as well. You can personalize your home while enjoying the financial benefits!
If you are considering purchasing your first home, I would love to speak with you further to help evaluate your current situation.