Advantages of Buying vs. Renting
- Rents are not deductible for income tax purposes.
- The portion of the monthly mortgage payment that represents property taxes and interest is income tax deductible, within certain limits.
- Without home mortgage interest deductions, many taxpayers do not have enought other qualified deductions to "itemize". Once you have more deductions than the standard deduction, every additional qualified amount is deductible. This often changes previously unused deductions into beneficial tax deductions, such as amount spent for medical, state tax, DMV fees, charity gifts, safe deposit fees, job seeking and employment related expenses.
- For individual taxpayers with roughtly $70,000 to $140,000 of taxable income, the tax bracket would be approximately 28% federal, plus 9.3% California, for a combined state tax rate of 37.3%. This is approximately the saving of any deductible amount spent.
Example: Rent =$1,500/ (no deduction, net cost = $1,500
Deductible; $2,300/ assumed amt for interest & property tax
x tax rate of 37.3%
= tax savings $858 (net cost to buy = $1,642)
- Additional benefits of buying include control of the property and improvements as well as the equity growth as the property appreciates over time during ownership.
- Its YOUR home!!
- For further information contact you tax advisor or CPA.