What is the advantage of buying a home rather than renting one?
There are many advantages and disadvantages to consider. For example, renters have the freedom of mobility if they choose to move, but their monthly rent checks do not establish long-term equity or produce any other benefits. And while homeowners‘ mortgage payments accumulate equity, these payments are generally higher than rent payments and come with the responsibility to manage the care and upkeep of the property. One last thing to consider are the tax savings that go along with being an owner instead of a renter. Take a look at the chart below. Owning your home can save you thousands each year in taxes.
|
Scenario of Two Households
|
Buy
|
Rent
|
| Earning Same Income |
$102,400 |
$102,400 |
| Standard IRS Deduction* |
n/a |
($10,000) |
| Mortgage Interest Deduction* |
($29,500) |
n/a |
| Property Tax Deduction* |
($4,900) |
n/a |
| Total Tax Deduction |
($34,400) |
($10,000) |
| Taxable Income |
$68,000 |
$92,400 |
| Total Taxes Paid |
($10,330) |
($16,430) |
| Annual Tax Savings (In Year 1) |
$6,100 |
$0 |
*Schedule Y-1 For Married Filing Jointly. Mortgage and Property Tax deductions are based on the entry-level priced home of $490,000, 85% of Aug 06 Median
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