There’s
nothing quite like a home in San Jose
that you can truly call your own. A place where you can
have the gleaming hardwood floors you’ve always
dreamed of, a space to cultivate your own vine-lined patio,
a way to provide a good neighborhood for your kids to
grow up in, and a freedom from the whims of your landlord.
These are the images that immediately come to mind, for
many of us.
Yet some of the biggest advantages of owning a home in
California are less romantic and more practical –
in fact, there are many financial advantages:
• Tax Deductibility:
You can deduct the cost of your mortgage loan
interest from your state and federal income taxes. Since
interest generally will account for most of your payment
during the first half of your mortgage, the savings can
be significant. Some of your costs at the time of closing
(including prepaid mortgage interest) can be taken as
deductions on that year’s income tax return, and
points paid up front at the time of closing represent
additional mortgage interest and may be taken as a deduction.
• Tax Deductibility
of Property Taxes:
You can deduct all of the property taxes you pay.
• Appreciation:
Potential Real estate is considered a good long-term
investment because it usually appreciates in value. The
effects of borrowing potential can increase as the value
of the home appreciates.
• Capital
Gains Exclusion:
When it’s time to sell your home the amount of capital
gains you have to pay is reduced. A homeowner can exclude
up to $500,000 per couple if married and filing jointly,
or $250,000 if single or filing separately for homes that
have been the taxpayer’s principal residence for
the previous two years.
• Capital
Gain Treatment:
Congress allows preferential tax treatment on
gains from capital assets held for more than one year.
This would be important for a homeowner who has gains
in excess of the allowable exclusion.
•Principal
Accumulation:
Mortgages are designed to pay the interest for
the time that the money has been used, as well as to retire
the principal debt over a period of time. This means that
part of the payment each month is for principal accumulation.
• Personal Enjoyment:
Pride of ownership is a valid reason for wanting
to own a home. You can personalize your home while enjoying
the financial benefits.
For the best evaluation of your financial situation, consult
your financial advisor. He/she will be the most qualified
to discuss the financial consequences of a home purchase
decision, as well as help you to establish a plan that
will achieve your home ownership goals.
Contact
us for more info on renting vs. owning in San Jose CA.
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