There is a big number of home renters out there especially in the Bay Area-California is paying rent on a monthly basis equal to or more than the monthly payment of house mortgage.
The years pass and they miss out on advantages and benefits for different reasons: Belief in myths about the house purchase, unprofessional advice from a friend or a family member, unawareness of their capability, etc.
Here are 6 benefits of home ownership:
Pride of Ownership
Pride of ownership is the number one reason why people yearn to own their home. It means you can paint the walls any colour you desire, turn your music up, attach permanent fixtures, and decorate your home according to your own taste. Home ownership gives you and your family a sense of stability and security. It's making an investment in your future.
Beyond pride of ownership, it's important to realize another benefit. First, real estate moves in cycles, sometimes up, sometimes down, yet over the years, real estate has consistently appreciated. The Office of Federal Housing Enterprise Oversight tracks the movements of single-family home values across the country. Its House Price Index breaks down the changes by region and metropolitan area. Many people view their home investment as a hedge against inflation.
Mortgage Interest Deductions
Home ownership is a superb tax shelter and our tax rates favour homeowners. Sometimes the mortgage interest deduction can overshadow the desire for the pride of ownership as well. As long as your mortgage balance is smaller than the price of your home, mortgage interest is fully deductible on your tax return. Interest is the largest component of your mortgage payment.
Property Tax Deductions
IRS Publication 530 contains tax information for first-time home buyers. Real estate property taxes paid for a first home and a vacation home are fully deductible for income tax purposes. In California, the passage of Proposition 13 in 1978 established the amount of assessed value after property changes hands and limited property tax increases to 2% per year or the rate of inflation, whichever is less.
Capital Gain Exclusion
As long as you have lived in your home for two of the past five years, you can exclude up to $250,000 for an individual or $500,000 for a married couple of profit from capital gains. You do not have to buy a replacement home or move up. There is no age restriction, and the "over-55" rule does not apply. You can exclude the above thresholds from taxes every 24 months, which means you could sell every two years and pocket your profit—subject to limitation—free from taxation.
Preferential Tax Treatment
If you receive more profit than the allowable exclusion upon sale of your home, that profit will be considered a capital asset as long as you owned your home for more than one year. Capital assets receive preferential tax treatment. This means even if your profit exceeds the exclusion, the taxable portion will be much less than you might imagine.
If you have any questions or concerns, Widad Yahia is licenced Real Estate Agent in California will be happy to provide professional assistance and guide you step by step throughout the process.