There are incredible advantages to owning your home, beginning with your taxes.
The federal government wants you to own a home. During 2009, the feds will give you $8,000 if you buy your first home. There is also a perk if you have not owned your principle residence for the last three years, you are considered in the group with “first time home buyers” and you also qualify for the $8,000 tax credit.
Even though you may have filed your taxes for this year, once you own your home, there are recurring annual tax benefits. For instance, the interest you pay on the mortgage is deductible on your income taxes, also the property taxes you pay are deductible on your income taxes.
There is also a tax benefit which is unique to owning your home, the Capital Gains Exclusion. Under the current tax laws, if you have lived in your principle residence for a minimum of two years, when you sell that house there is an exclusion of up to $250,000 on the capital gains of that sale. If you are filing a joint return, that exclusion goes up to $500,000 in capital gains.
To maximize the benefits of the tax deductions of home ownership, you do have to itemize your deductions, but the combination of mortgage interest and property taxes usually exceeds the standard deduction which is currently between $3,450 and $10,000 depending on your income. When you do itemize you can also deduct other items such as charitable contributions when you give to your church or other worthy cause. You also deduct your state income tax, medical expenses, dental expenses and fees such as paying your income tax preparer. All together, these deductions can reduce your tax liability by a significant amount.
Now the word of caution on tax preparation, consult your tax adviser about all the deductions that may fit your situation.