One of the benefits of homeownership is the mortgage-interest deduction. First time homebuyers are often very unclear about how this works. In an effort for clarification, and as a reference point to direct my Home Buyers to, I offer this brief explanation:
HomeBuyer A makes $50,000 a year. Her mortgage interest paid in 2010 was $7000. As a result, she will be taxed only on $43,000. The $7000 mortgage-interest is taken as a deduction from her income—she doesn’t have to pay taxes on this “income!”
Renter B makes the same $50,000 a year. Last year he paid $9000 in rent. It’s tax time and he will be paying taxes on his full $50,000 salary.
As you can see, not only does Renter B lose out on pride of ownership, but his rent money is a bye-bye—never for him to be recouped.
While HomeBuyer A enjoys the and freedom to create her property to her wishes, she also gains short-term financial benefits annually, as well as long-term benefits, when the equity of her property begins to kick in, years down the road.
Are you still renting? Were you previously a home owner?
Call me. Let’s elevate your hard earned $ into something more enjoyable and ultimately, more profitable for you and your family.
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