What exactly are the tax breaks you get for owning your own home?

Question

Are the tax breaks only felt when you file your yearly taxes and get a refund, or can they be felt on a monthly basis once you purchase? I really need to buy because rent in southern California is so high, but as a single mom, I am not sure if I can afford to buy. Any insight you have on this matter will be appreciated.

Answer 1

The tax breaks you always hear about are really overrated. You can itemize and deduct interest on the mortgage and taxes paid, but in my case the standard deduction gets me a bigger deduction than itemizing all the housing things. You do have the piece of mind of owning something and building equity. That is the biggest positive thing about owning a house.

Answer 2

The tax break on home ownership does not apply in Southern California at this time. There is a p&e (price to earnings) ratio on homes just like other things considered investments. In short, your home value will not appreciate fast enough currently to make buying a home less expensive than renting. In the long run, you will have equity, ownership and the rights you gain as a homeowner (and I mean in the long) run.

Good reasons to buy a home in So. California right now:

1. You have cash

and/or the following:

2. You can afford to fix your payment for a minimum of 10 years

3. You can afford an adjustable rate payment that WILL increase meaning you know you're getting a big raise over what you're making right now or are sure you will be winning the Lotto

4. You don't really care if the payment goes up and could give a hoot about a foreclosure on your credit

5. You totally trust mortgage bankers and real estate agents in a recessed real estate market.

Bottom line is that the bottom hasn't arrived yet and if I were you, I'd wait for things to become more favorable for a buyer meaning stable interest rates combined with this same or greater inventory of homes to choose from.

Two cents...from a realtor

Answer 3

Any mortgage interest you pay is tax deductible. In So Cal this will definitely be more than the standard deduction. You can (and should) decrease the tax that is withheld from your paychecks accordingly because your annual tax liability will be decreased. So yes, you could wait and get a ginormous refund, or change your withholding and make use of the "extra" every month to pay that monster mortgage payment. You will want to meet with a tax professional to determine how much you should have withheld, and always err on the conservative side. Good luck!

Answer 4

I have a 145k balance on a two year old mortgage....I pay about $5000 in property tax here in michigan, which is an expensive state....

I got back the $5000 in my tax refund, so essentially the property taxes are a wash....In a place like Arizona with low property tax, you would come out much further ahead, with a loan like mine.

I agree with the realtor, the bottom hasnt happened yet...But SoCal, will never be affordable again....look at it as a place to live, not as an investment.

Answer 5

You can deduct the interest paid on the mortgage, the property tax paid on the house and land, and that's about it.
(goes on schedule A)

But,, you would need to look at your standard deduction vs what you would be able to claim on Schedule A,, many people don't have enough deduction to be able to use itemized deductions.

Answer 6

I think you pay more tax owning a home. " property tax "