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Tax Savings
Renting? WOW! Uncle Sam can help.
Now Uncle Sam will subsidize a portion of your monthly payment. Let's explore the tax advantages of owning versus renting:
- Interest you pay on first and second mortgages up to $1 Million is generally tax-deductible.
- Property taxes are deductible
- On a purchase, any points paid to reduce your interest rate are deductible in the year they are paid
Let's look at just how big a subsidy you could potentially receive if you bought a $200,000 home with a $180,000 mortgage at 7%. The first years' interest would be $12,542 and the property taxes would be $2,500. Here's what you'll save:
Tax savings total: $4,211 or $350 per month. The total payment on this $180,000 loan with principle and interest, taxes and insurance included is $1,445. The effective payment is only $1,095 after deducting the tax savings.
In this example, Uncle Sam will subsidize $350 of your house payment. Of course your personal numbers will differ, but there are tax savings for you when you purchase.
How can you not choose buying over renting with this kind of help? And, this doesn't even take into account the fact that you are purchasing an asset that historically has continuous appreciation.
Another Great Tip
Many people think that owning a home will only benefit them at the end of the year via a refund on their taxes. Not so! If you would like to realize the above benefit of $350 on a monthly basis, you can. Just consult with your tax preparer/advisor to see how much you should adjust your withholding exemptions so you take more home from every paycheck. That way, you can realize the tax savings immediately.
We can provide you with the figures for your particular buying situation. This will also help you determine if paying points makes sense for you.
Sean West Express
19083 Clemans Drive
Castro Valley, CA 94546
Phone 877-272-1546
Fax 510-217-2439
