Stop Paying Rent (and someone else's mortgage!)
Everyone needs a roof over their heads and your monthly rent provides you with this necessity. You work hard for your money, so shouldn’t your monthly housing payment work hard for you?
When you make a mortgage payment on your home the payment primarily consists of two parts; principal balance repayment and interest due on your loan. Each payment towards the principle balance of your mortgage lowers your balance and increases the equity in your home. The interest portion that you pay on your mortgage is fully deductible on your tax returns as long as your mortgage balance is less than the price of your home.
Put your money to work, increase the equity in your home and reap the tax benefits available to you!
Invest in Yourself
The mortgage industry and the housing market have certainly been in the news over the past few years and just about anyone will admit that times have been tough. But the truth of the matter is that although real estate moves in cycles, over the long term, real estate has consistently appreciated.
The Office of Federal Housing Enterprise Oversight tracks the movements of single family home values across the country. Its House Price Index breaks down the changes by region and metropolitan area. Your home is a long term investment, and the opportunity to buy low is now.
Build Equity and Peace of Mind
As you mortgage balance decreases and the value of your home increases over time you begin to build equity. Having equity in your home allows you to weather slumps in the housing market without fear and also give you an excellent source of collateral to borrower against.
Many consumers carry credit card balances with interest rates as high as 18% to 22%, worse yet this interest isn’t tax deductible. Where available home equity loans allow homeowners to tap into the equity of their homes at lower, tax deductible interest rates. These programs are great when you want to make improvements on your home, send your children to college or start a new business.
Other Tax Benefits
In almost all circumstances owning a home will involve paying some form of property taxes. IRS Publication 530 is an excellent resource of tax information for first-time home buyers. Real estate property taxes paid for a first home and a vacation home are fully deductible for income tax purposes. In California, the passage of Proposition 13 in 1978 established the amount of assessed value after property changes hands and limited property tax increases to 2% per year or the rate of inflation, whichever is less.
Additionally, as long as you have lived in your home for two of the past five years, you can exclude up to $250,000 for an individual or $500,000 for a married couple of profit from capital gains. You do not have to buy a replacement home or move up. There is no age restriction, and the "over-55" rule does not apply. You can exclude the above thresholds from taxes every 24 months, which means you could sell every two years and pocket your profit--subject to limitation--free from taxation.
