This age old expression is one that’s been widely used for a number of years. Its application also extends the real estate arena. However, it’s worth noting that when it comes to financial freedom and real estate investment, pride should never be involved with your decision to buy a home.
In previous articles I have commented on the many avenues to wealth that real estate investment affords. Even when it comes to one’s personal residence, it’s good to think like an investor. Since a healthy percentage of U.S. voters also own their homes, it stands to reason that many laws would be in place that protect and assist these homeowners. And that is exactly what has occurred!
It’s obvious that Federal tax laws favor citizens that have a mortgage. While a person’s rent payment is not tax deductible, over 90% of a homeowner’s mortgage payment is deductible. This deduction normally exceeds the standard deduction, providing the homeowner with a significant tax savings. This is money that goes directly in the homeowner’s pocket.
Added to this tax savings, you have the depreciation factor to take advantage of. Congress allows homeowners to deduct the improved value of a home from their taxes over a period of a few years. Since this is often 75% of the purchase price, homeowners are able to put even more money in their pockets.
Another great shelter that’s provided by the government is the exemption that homeowners can take when they sell their primary residence. This is one of my favorite shelters. Every few years a homeowner can sell their home and move. Any of the gains or profits from the sale is tax free.
Here is the stipulation: You must have lived in the property at least two out of the last five years to qualify. This can be done to the tune of $250,000.00 each time. Married couples can go up to $500,000.00 without paying any gains taxes.
How about that?! There really isn’t much more one has to do to qualify for these advantages. This is a sure way to financial independence if one follows the “buy low, sell high” principle. Today’s real estate market is positively the best in decades for doing just that.
It’s clear that the wisdom of homeownership is measured in dollars and cents. Never let pride get in the way of making a home buy decision that could have an affect on your financial future. However, when you are wise about real estate investment, you will be very proud that you made a great financial move when you made the decision to buy your house.
