This calculator will help you to estimate the tax savings that you will realize due to the deductable interest and property tax payments you will make on your mortgage.
Rent Versus Own: Get the Tax Facts
Trying to discern the various advantages and disadvantages of home ownership versus renting? One of the first places you will go hunting for facts and figures to strengthen your case is undoubtedly in the tax department. There are major tax breaks to be found for new homeowners, some in specific areas of the country and for very defined housing structures or building propositions. For instance, many sustainably oriented or “green” buildings that possess built in features such as solar paneling, recycled materials, or lighting that automatically turns off when not in use may now be eligible for significant tax breaks in certain parts of the country.
Additionally, there has been a strong surge of tax related initiatives in the last few years in an inverse relationship to the dipping of the economy. Because the real estate market has suffered and would be homeowners simply have not been able to get their hands on the expendable cash to make a down payment on a home, the government has extended its aid through the IRS and pushed out several tax based incentives for homeowners. For instance, homeowners will remember the very popular $8,000 new home buyer's credit that the Obama administration offered to prospective purchasers a few years ago. Current renters made be persuaded by the tax discounts alone to take the plunge into home ownership if they are otherwise ready and financially prepared to shoulder the responsibility.
The Benefits of Home Ownership
In financial terms it makes absolute sense to bite the bullet and say yes to home ownership if a few prerequisites are true. First, the prospective buyers should be absolutely certain about their choice of home for the semi-long to long term. Home ownership benefits the most financially when the owners are committing to their choice of home for a number of years, provided that factors like employment and family stay the same. Second, renters who are paying very little for their living situation and who are also considering relocating within the next two to ten years are not ideal candidates for a residence. The costs of maintaining a home, including property insurance, homeowner's insurance, neighborhood association fees, repairs and damage, and utilities add up to a significant chunk, and only those who are fully committed to the house will truly benefit from whatever tax breaks there may be.
Renting versus Owning Your Own Home
The tax benefits of owning your own home can be numerous and will largely rest on the determining factors of home cost, principal and interest payments on a mortgage, income bracket of the owner(s), filing status, state and local tax rates, appraised home value, house related expenses, pre-existing real estate taxes and insurance. Once you collect and enter this information into the tax benefits calculator, you will be able to see to a penny just how much you will save on monthly costs by owning instead of renting a residence.
In order to grasp the full results, long term thinking is necessary. The rent of an apartment might be cheaper month to month than the 10 year mortgage of the house you are looking at, but depending on your situation you may end up saving enormous amounts of money in the long run if you plan on staying in one place for a long time anyway.