RISMEDIA, April 12 – As tax season comes to a close, the possibility of home ownership
weighs heavily on the minds of renters and other prospective homebuyers. Owning a
home is the American Dream, but renters are often apprehensive about taking on the
financial responsibility of home ownership. Along with the pride, security and sense of
community that come with owning a home, the professionals at Coldwell Banker remind
taxpayers that owning a home rather than renting also offers financial benefits.
Recent federal tax code changes are yielding greater financial gains for homeowners than
ever before. For years, the U.S. Congress has rewarded homeowners with tax breaks,
and in 2005 homeowners are expected to receive more than $116 billion in direct tax
subsidies, according to the Joint Committee on Taxation.
Coldwell Banker has identified the following list of tax incentives for home ownership, but
as always, advises that taxpayers seek out the advice of a financial professional:
* Deductible Property Taxes and Interest: Most homeowners can deduct property taxes
and interest paid on their mortgage every year of ownership. In fact, the tax code allows
homeowners to write off interest on first and second mortgages -- including equity lines
and loans -- up to $1.1 million worth of the overall mortgage debt. That is expected to
amount to $72.6 billion in tax deductions this year alone.
* Borrowing Against Equity: Homeowners can borrow against the equity they have built up
in their homes. Equity from a home can be used to improve the property, buy a car or pay
for education. Homeowners may also have the ability to deduct the interest from their
federal taxes. Renters
never have this opportunity.
* Real Estate Tax Exemption: Depending on the state, certain real estate tax exemptions
apply for homeowners who meet specific criteria. Homeowners should check with local
assessors and tax consultants to see if any exemptions apply to them.
* Yearly Home Appreciation: Although it is not a tax advantage, homeowners build equity
and realize yearly appreciation of their property over time. Renters receive no financial
return on their monthly rental costs.
* Recent Federal Government Changes: During the last few years, the federal
government has made owning a home even more financially favorable. Recent
improvements enacted include the following:
* In 2005, the 15 percent tax bracket for married couples will
increase from $46,700 to $55,900, so that many families currently in the 27 percent
bracket will drop back a level allowing for more tax savings.
* The federal government has recently relaxed rules on IRA and 401(k) retirement
accounts, permitting first-time homebuyers to tap into their retirement funds for their down
payment without paying penalties on early withdrawal.
* The federal government now offers exclusions of capital gains on sales of principal
residences, which has resulted in $22.9 billion in tax benefits over the last several years.
This category has ballooned since 1997, when Congress first sanctioned tax-free
treatment of up to $250,000 (for single filers) or $500,000 (for married joint filers) on
home-sale profits. The exclusions are available on homes owned for just 24 months, and
can be used without limit every 24 months.
For more information, visit http://www.coldwellbanker.com/
Author: Beth Bresnahan
Publishing date: 04/12/05
From: www.rismedia.com
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