This is the time of year when they get pretty excited because they’re adding up the extra tax savings they were never entitled to before they owned a home.
Owning a home is one sure way to lower your taxable income because the interest on the payments you make is fully tax-deductible on mortgages up to $1,000,000. To claim this deduction, you must itemize the amount of interest paid on Schedule A of your 1040 instead of taking the standard deduction.
As we enter the spring home buying season, typically the busiest time of year for home sales, Realtors say it remains a buyers market. This is especially helpful if you are a first-time buyer and don’t have a house to sell before you move.
Economic reports released yesterday show that the median sales price of a home fell to $158,800, down 3.7% from one year ago, to the lowest level since April 2002. But even with lower home values, buying a home remains a good investment.
If you don’t think you can afford a home, what you may not realize is that long-term, you can’t afford not to buy a home. In most cases, even if home values depreciate, you’ve still made the better investment with your money than if you had rented.
Perhaps cold, hard numbers say it best. For instance, let’s look at a renter with a monthly rent payment of $800. Over five years, they will have spent $48,000 on rent. In 10 years, that number rises to $96,000. That’s a large amount paid without any equity to show.
So, if you’re worried that a home may not be the investment it once was – think again.
Better yet, if you’re a first time buyer, use this year’s tax refund as a down payment on a new home. Next year your income tax return will thank you.