There is no feeling like that of owning your own home, of walking up to the welcome mat with your new set of keys, and unlocking the door to your future. This can be especially exciting if the home is a new semi-custom home that has been fitted to your preferences.
Bill Beazley Homes loves helping homeowners achieve this dream across Augusta, Georgia and Aiken, South Carolina. We always take care to remind our clients of the financial benefits of home ownership during this time of year: TAX SEASON.
A dreaded time for many, tax season is actually a great time for new home buyers, as they get to reap many exciting deductions and other benefits which are denied to home renters.
6 Benefits of Owning a Home During Tax Season
Homeownership Can Build Your Wealth
Don’t be scared away by the real estate turbulence of the past decade. The truth is owning a home is and always has been a great move financially speaking–but only if you buy a home you can afford. Finding out what your budget is, and sticking to this budget is extremely important if you want your home to build wealth over time.
Home Ownership Can Build Equity and Savings
If you make your mortgage payments each and every month, the portion of what you pay reduces the money you owe on the home. Along with this reduction every month comes an increase in your equity. In fact, paying the mortgage every month is kind of like a forced savings plan because in a sense you are building up more valuable equity in your home.
You Can Stack Mortgage Tax Deduction Benefits
Mortgage deduction: Homeowners can deduct the mortgage interest from their tax obligations. Since this is usually a large component of your mortgage payment, this is usually a hefty deduction.
Some closing cost deductions: First year home buyers should remember this deduction. Even if the closing cost is paid for by the seller, home buyers can still claim these origination fees on the loan.
Property tax is deductible: Property taxes paid at your primary residence and vacation home are fully deductible for income tax purposes.
Related: 5 Benefits of Owning a New Home
Tax Deductions on Home Equity Lines
This tax deduction helps homeowners get out of paying horrendously high credit card interest rates. How? Home owners can deduct the interest they pay on a home equity line of credit, allowing them to shift their credit card debt to their home equity loan and pay a lower interest rate. In turn, the extra interest accrued from the combined debt is also tax deductible.
You Get a Capital Gains Exclusion
In order to qualify for capital gains exclusion, you must buy a home to live in as your primary residence for more than two years. When you sell, “you can keep profits up to $250,000 if you are single, or $500,000 if you are married, and not owe any capital gains taxes,” says Forbes.
This tax benefit comes in handy for homeowners who purchased their home prior to 2003, since chances are the home has appreciated in value since that time.
Buying Is Cheaper than Renting
In the long run, buying a home is much cheaper than renting. As the interest portion of your mortgage decreases, the interest you will pay will be lower than the rent you would have been paying. In addition, money isn’t being thrown away on a home that you can never truly call your own. Don’t get stuck in the rut of paying off your landlord’s home. Pay off your own!