We are seeing increasing numbers of buyers entering the market. Rates are still relatively low, and values have come down and in many areas seem to not only have bottomed out but are also moving higher. It is always very difficult to pick the bottom, or top, of any market, but housing has not been this affordable for quite some time. Buyers are experiencing tighter underwriting standards than in previous years.
But we remind our customers that there are still superb advantages of buying over renting. Your agent can easily go through the “buy versus rent” numbers with you. While renting offers few, if any, tax breaks, buying a home offers several tax benefits that can make homeownership more affordable and a wise choice.
For example, home owners can take an itemized deduction on interest paid on home loans of up to $1 million for a principal residence and/or second home. This deduction could potentially reduce the cost of borrowing by one-third or more. Owners are able to deduct from their federal income taxes the state and local property taxes that you pay on the home. Several closing costs in a home purchase are also deductible, such as loan origination fees (points), prorated interest on a new loan, and prorated property taxes paid at settlement.
Homeowners who have lived in their home for two of the prior five years prior to its sale do not have to pay income tax on the majority of their profit — $250,000 for single homeowners and $500,000 for married homeowners who file jointly. And we see many homeowners who rent out their homes for part of the year - home owners can rent the home up to 14 days during the year and pay no tax at all on the rental income.
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