There is nothing like owning your own home. A place that you can call your own, with a style and a design exactly how you envisioned it. A good school system for your children, a safe neighborhood or even the yard landscaped just the way you’d like it. There are so many reasons to purchase your own home.
In most cases it’s better to buy instead of rent, and to buy as soon as you can afford to do so. Below are some of the more practical financial benefits that come along with home ownership:
- 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.
- Tax Deductibility of Property Taxes You can deduct all of the property taxes you pay.
- Appreciation Potential Real estate is considered a good long-term investment because it usually appreciates in value. The effects of borrowing potential can 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.
For the best evaluation of your financial situation, consult your financial advisor. He/she will be the most qualified to discuss the financial consequences of a home purchase decision, as well as help you to establish a plan that will achieve your home ownership goals.