Glenda Feeken - Come Live and Play on the Kenai

Personal Freedom & Self-Expression

Although owning a home offers several economic advantages over renting, the best part of home ownership, for many, is the personal freedom and control it affords. When it comes to choices about where you want to live, home design, decor, architecture, landscaping, and improvements... Its your house. You call the shots. But if thats not enough, here are some powerful financial benefits we were talking about: An Improved Financial Picture

• Since your housing investment is secured by real property -- a tangible asset that traditionally appreciates over time, it is one of the safest investments you can make. Building equity in a home provides a safe, solid way of saving. Home ownership can also provide a real sense of security and stability in a turbulent world.
• Increase your take-home pay - Since your mortgage interest is tax deductible, you can increase your number of withholding allowances to compensate for this deductible expense. More allowances mean fewer dollars withheld from your paycheck so you see more money in your pocket than when you were renting or buying at a lower interest expense. But this is only one of many tax benefits. In fact, because there are so many tax benefits associated with buying, owning and selling a home, these will be addressed separately below. (See TAD)
• Inflation hedge - Unlike renting, once youre locked into a mortgage, your payments are pretty well set. As inflation creeps ever upward in many other areas, your house payment remains unchanged unless you sell, move, or refinance. But in any case, youre in control!
• Upward mobility - As you gain equity, you can leverage it into another larger or more desirable home, and by making a sizable down payment, trade up without dramatically increasing your monthly housing cost.

Tax Advantages Detail (TAD)

One thing is certain. If you can own it, they can tax it. The other thing certain about taxes is that nothing is certain about taxes. The rules of the game are constantly changing. Thats why its important that you consult with a professional for specific advise about your circumstances. So much for the disclaimer. Now, here are some of the tax advantages currently in place for buying, owning, and selling a personal residence.

Benefits When Buying

Deductions allowed for: (based on your tax bracket)

• Points charged on your loan at closing whether paid by Seller or Buyer. (A point equals 1% of the loan amount)
• Any mortgage interest prepaid between closing and the first regular mortgage payment Local property taxes paid on the purchased property
• Some closing costs Benefits While Owning The following expenses are deductible
• Mortgage Interest
• Property Taxes
• Home office expenses
• Health-related additions (provided no resale value is added to the home)
• Casualty losses not reimbursed by insurance coverage (flood, fire damage, hurricane, etc.)

Benefits When Selling

Many of the expenses associated with selling your home are tax deductible such as:

• Repairs - According to current law, repairs must generally be made within 90 days of the contract date and paid for within 90 days of closing. Capital improvements, such as a new roof or new kitchen would be excepted.
• Mortgage prepayment penalties, if applicable. This is rare in todays market.
• Moving expenses (subject to limitations and conditions specified by the tax code.)
• Up to 2 year deferment of taxes on the sale of your personal home if you purchase a new home of equal or greater value
• Home improvement costs may be deducted from the net sale price when deferred taxes on the sale come due.
• Title Insurance fees, recording fees, transfer taxes and other costs of acquisition are also deductible against the capital gain at the time of sale or when deferred taxes come due.
• Gains of up to $250,000 if single and double if married are exempt from taxation if you have lived in your home for 3 of the past 5 years.
• Sellers age 55 or older had one other option. They could take a once-in-a-lifetime tax exemption of up to $125,000 in profits. And in all instances, there was tax paperwork (Form 2119) to fill out to show that you followed the rules.