Aside from the non-tangible benefits of owning a house such as pride and security, there are a lot of financial benefits when it comes to owning your own home, and some of these financial benefits will be very useful when tax season draws near.
So what are these benefits?
It builds wealth over time
Our parents and their parents before them always believed that owning a house was one of the best financial investments possible, but with the recent housing bubble situation, not a whole lot of people believed in it anymore. So the new generation has to be slowly convinced that owning a home is indeed something that is beneficial – providing that you buy a home that you can afford.
Capital Gain Exclusion
If you have lived in your house for two of the past five years, you can be exempted up to $250,000 for an individual and $500,000 for a married couple of profit from capital gains. The better news is you don’t need to buy a replacement home or move up. There is no age restriction and the over 55 rule doesn’t apply. You can exclude from the above thresholds every 24 months. What does this mean? This means that you could sell every two years if you want, and pocket your profit (subject of course to limitation), free from taxation. Ka ching!
You Build Equity Every Month
The equity in your home is the amount of money that you can sell it for minus what you still owe on it. Every month that you make a mortgage payment, and every month a portion of what you pay reduces the amount that you owe. That reduction every month increases your equity. Equity is like savings, so every month you are forced to save and it is a very good thing.
There are mortgage tax deduction benefits
The tax code allows homeowners to deduct the mortgage interest from their tax obligations, and since interest payments can be the largest component of your mortgage payment, this can mean considerable savings to you.
Another benefit involves some closing cost deductions. The first year you buy your home (I recommend contacting www.vr-va.com for this), you are able to claim the points on your loan no matter if they are paid by you or the seller. And because origination fees of 1 percent or more is fairly common, you can get considerable savings.
And finally, you will be happy to know that property tax is deductible on your primary residence and your vacation house. 😉