NOT SURE WHERE TO START? Contact Us First Time Homebuyers Secure Financing Mortgage Calculator Rent VS Own Tax Advantages to Owning a Home 0% Down Credit Repair Scams Credit Scoring Credit & Divorce FHA Loans INTEREST ONLY LOANS Types of Mortgages Homebuyer Resources Home			Owning a Home has Some Real Tax Advantages Tax Advantages and Financial Reasons to Own a Home Yes, there are tax advantages for owning a home. The following is information from the National Home Builders Association. Buying a new home is one of the smartest purchases you can ever make. One of the reasons is that homeownership has many positive tax implications. Because of changes to the tax code passed in 1997, these tax implications are much more favorable for most homeowners today than in the past. According to the law, married homeowners do not have to pay taxes on up to $500,000 in capital gains realized on the sale of their homes. The $500,000 provision applies to married homeowners filing joint returns and is restricted to homes sold on or after May 7, 1997. To qualify, the home would have to have been used as a principal residence for at least two of the previous five years. Taxpayers who file individual returns may claim up to $250,000. According to the previous rules, the tax on any profit would be deferred if the sellers of the home bought and occupied another home of equal or greater purchase price within 24 months before or 24 months after the sale of the old residence. The previous law also allowed for a one-time capital gains exclusion. Home sellers who were at least 55 years old could realize a tax-free gain of up to $125,000 if the home had been used as a principal residence for at least three of the previous five years. Under the old law, home sellers could use their capital gains exclusion only once after turning 50. Under the new law, people over 55 who already have used their exclusion can take advantage of the new tax provisions, assuming that they have occupied their new residence for at least two of the previous five years. First time homebuyers also benefited from a special provision of the new tax law. One of the largest obstacles to homeownership usually is the inability of potential first-time homebuyers to save enough money for the down payment. In 1997, Congress passed a new provision allowing first-time homebuyers to withdraw up to $10,000 from their IRA accounts if the money is used for a down payment on a home. The penalty-free provision can be applied to IRAs owned by the homebuyers, their parents, or their grandparents. Under current law, early withdrawals from an IRA incur a 10 percent penalty. HOW UNCLE SAM HELPS YOU PAY YOUR MORTGAGE A Case Study: Jack and Jill have a combined income of $50,000. They are purchasing a home for $150,000, making a 10% down payment, and borrowing $135,000 on a 30-year mortgage at 8.5%. Their monthly principal and interest payments amount to $1,038. The table to the right shows the value of the tax deductions and the amount of cash they will save.   Renters Buyers Income $50,000 $50,000 Itemized deductions:     State income tax 2,350 1,700 Contributions 400 400 Interest payments, 1st year   11,892 Points   4,050 Real Estate taxes   1,800 Total Itemized Deductions $2,750 $19,842 Deductions (standard or itemized) 6,200 19,842 Exemptions (2) 4,700 4,700 Taxable Income 39,100 25,458 Federal Income Taxes (Marginal tax rates 28% vs. 15%) 6,151 3,819 Total Tax Savings:      First Year $2,982      Monthly $234 more >>>