Homeownership Has Perks
A Guest Post from Melinda Elliott, CPA
Are you thinking about buying a house? Wondering: should I buy or keep renting? Or maybe the real question you’re asking yourself is whether buying a home is financially right for you?
For starters, there are many reasons to purchase a home; some personal and some financial. I can’t help with the personal aspects, but I can shed some light on the money side of things that could also benefit your overall yearly tax obligations
When you are renting someone else’s property, that monthly rent check is essentially paying off their mortgage debt, with no financial gain to you at all. You wouldn’t walk up to a total stranger on the street and hand them free money to pay their bills, would you? You work hard for your money and would like it to go towards your personal aspirations.
Just yesterday, I received a call from a new client who met with their real estate agent. The agent was trying to explain the general tax benefits of owning a home. On the surface it sounded simple, but just like everyone else, their particular financial situation is unique and they wanted to know how this large purchase would affect their taxes before proceeding.
Tax Deductions for Maryland Homeowners
There are tax and financial advantages to owning your own home, which renters cannot obtain. For instance, part of the check you write to the mortgage company each month is for mortgage interest and real estate taxes, which are tax deductible. These deductions reduce the amount of tax you owe, which means you get to keep more of your paycheck!
How does this work? If you are renting a home, most likely you are taking the “standard deduction” on your yearly taxes. This means that each year the IRS tells you what deductions you can take against your income.
As a homeowner, you can itemize your deductions, which include:
- your mortgage interest,
- real estate taxes,
- state taxes,
- charitable contributions
- and other miscellaneous deductions.
In general, as a homeowner, the sum of these amounts typically exceeds the standard deduction allowed by the IRS. Bottom line, you owe less tax. Less tax to the government means more money for you!
I know this sounds simple but it isn’t. The tax law is extremely complicated, and the decision to buy or not to buy a house should not be taken lightly. Always, seek the advice of a qualified tax professional before making any major life decisions.
Melinda A Elliott, CPA
Elliott CPA, LLC
237 West Patrick Street
Frederick, MD 21701