There are several reasons to
buy a home, and the most important reason is that it is the ONLY way a working person can lower
their income taxes. Loan interest on homes
are tax deductible and there is NO
tax advantage when you rent.
How much can you deduct off of your income tax will
depend on how much your salary is. The
average amount a person pays is around 25% of their salary in federal income
taxes, so the more money you make the more you can deduct from you income
taxes.
Below are several charted examples
of how much you can deduct, but these two statements should make it clear if
your tax bracket is at 25%:
If your rent is $2, 147.00 per month you are paying $30,730 for housing per year.
If your loan is $2,147.00 per month you are paying $20,801 for housing per year.
If you
buy a home you can save up to $10,000 or more per year.
Interest rates today with 20% down can be under 4%.
INTEREST
RATES; 4% WITH A TAX BRACKET OF 25%
|
Loan Amount
|
Rent or Loan Payment Per
Month
|
Cost to Rent First Year
|
Cost To Borrow First Year
|
Rent Verses Loan Savings
First Year
|
|
$600,000.00
|
$2,864.50
|
$40,326.00
|
$28,422.00
|
$11,904.00
|
|
$500,000.00
|
$2,387.08
|
$33,605.00
|
$23,685.00
|
$9,920.00
|
|
$400,000.00
|
$1,909.67
|
$26,884.00
|
$18,948.00
|
$7,936.00
|
|
$300,000.00
|
$1,432.25
|
$20,163.00
|
$14,211.00
|
$5,952.00
|
|
$200,000.00
|
$954.83
|
$13,438.00
|
$9,478.00
|
$3,960.00
|
|
$100,000.00
|
$477.42
|
$6,721.00
|
$4,737.00
|
$1,984.00
|
Interest rates today with less than 20% down can be over 4%.
INTEREST
RATES; 5% WITH A TAX BRACKET OF 25%
|
Loan Amount
|
Rent or Loan Payment Per
Month
|
Cost to Rent First Year
|
Cost To Borrow First Year
|
Rent Verses Loan Savings
First Year
|
|
$600,000.00
|
$3,220.00
|
$46,101.00
|
$31,201.00
|
$14,900.00
|
|
$500,000.00
|
$2,684.00
|
$38,417.00
|
$25,994.00
|
$12,423.00
|
|
$400,000.00
|
$2,147.00
|
$30,730.00
|
$20,801.00
|
$9,929.00
|
|
$300,000.00
|
$1,610.00
|
$23,051.00
|
$15,601.00
|
$7,450.00
|
|
$200,000.00
|
$1,073.00
|
$15,367.00
|
$10,401.00
|
$4,966.00
|
|
$100,000.00
|
$536.83
|
$7,684.00
|
$5,200.00
|
$2,484.00
|
Keep in mind that you also have to pay 1% of the sales price for
property taxes, but the increase in value, (equity) should make up the cost of
taxes plus property taxes are also deductible.
Check back next month as I will be writing a blog on home
equity after the recession. If you cannot wait, give me a call at 805-27-5860 or email me David@DNorwood.com
David Norwood-Central Coast Real Estate
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