By Kevin M
Despite hints and statistics showing a somewhat improved housing market, now is not the time to merely assume that the market is teeming with good deals and that a return to the real estate price spiral will soon cover any mistakes made in the purchase. The market remains sluggish in most areas, and if it remains this way for several more years, getting the best deal is more important than ever.
The most important moment in the ownership of a home is the purchase. A good deal at purchase can reap big rewards in the future—especially if prices don’t rise appreciably in the near future. You only have one shot at making a good deal, so make it the best you can.
But how do you get the best deal on a home in this market? The same ways you would in any type of market.
Tax Benefits of Homeownership – Three Reasons Its Over-rated
By Kevin M
One of the most compelling reasons for owning a home is the heavily touted tax benefit owing to deductions for mortgage interest and property taxes. Real estate agents will play this benefit for all it’s worth in extolling the idea of homeownership for all.
However for three reasons, this benefit is not what it used to be: a generous standard deduction, low mortgage rates and low marginal tax rates.
The tax benefit of homeownership became an entrenched concept back in the 1970s and early 1980s and at that time it had overwhelming merit. Mortgage rates were in double digits most of the time, marginal tax rates ran as high as 70% and standard deductions were down in the low thousands. Owning a home made major sense even for moderate income earners and was an article of faith in the higher income brackets.
None of that is true today, yet the tax savings pitch remains. Standard deductions can exceed $11,000, interest rates are down around 5% and marginal tax rates cap out at 38% (but are substantially lower for the vast majority of households). Yet the notion of major tax savings remains almost unchallenged.
Continue reading Tax Benefits of Homeownership – Three Reasons Its Over-rated →