The Real Cost Of Renting
*based on a 2% rental increase
each year.
If you now pay…
| |
|
|
|
$900/mo |
$1000/mo |
$1200/mo |
$1400/mo |
$1600/mo |
|
This Year |
$7,200 |
$8,400 |
$9,600 |
$10,800 |
$12,000 |
$14,400 |
$16,800 |
$19,200 |
|
Next Year |
$7,344 |
$8,568 |
$9,792 |
$11,016 |
$12,240 |
$14,688 |
$17,136 |
$19,584 |
| 3rd
Yr |
$7,491 |
$8,739 |
$9.988 |
$11,236 |
$12,485 |
$14,982 |
$17,479 |
$19,976 |
| 4th
Yr |
$7,641 |
$8,914 |
$10,188 |
$11,461 |
$12,734 |
$15,281 |
$17,828 |
$20,375 |
| 5th
Yr |
$7,794 |
$9,092 |
$10,391 |
$11,690 |
$12,989 |
$15,587 |
$18,185 |
$20,783 |
| 6th
Yr |
$7,949 |
$9,274 |
$10,599 |
$11,924 |
$13,249 |
$15,899 |
$18,549 |
$21,198 |
| 7th
Yr |
$8,108 |
$9,460 |
$10,811 |
$12,163 |
$13,514 |
$16,217 |
$18.920 |
$21,622 |
| 8th
Yr |
$8,271 |
$9,649 |
$11,027 |
$12,406 |
$13,784 |
$16,541 |
$19,298 |
$22,055 |
| 9th
Yr |
$8,436 |
$9,842 |
$11,248 |
$12,654 |
$14,060 |
$16,872 |
$19,684 |
$22,496 |
|
10thYr |
$8,605 |
$10,039 |
$11,473 |
$12,907 |
$14,341 |
$17,209 |
$20,078 |
$22,946 |
|
TOTAL |
$78,838 |
$91,978 |
$105,117 |
$118,257 |
$131,397 |
$157,676 |
$183,955 |
$210,235 |
Think about the home you
can
purchase using that money. Not to mention the potential annual tax deduction
for mortgage interest paid (see below). The sooner you get into the market, the more you'll
benefit from homeownership. So, just stop paying rent!
Top 10 Tax Breaks Of Homeownership
When it comes to taxes, there's no place
like home to find shelter.
Your next home offers a score of tax
deductions and credits designed to help offset the cost of housing and to keep
the housing market fueled with new buyers. Take advantage of them as soon as you
can.
Here's a look at the Top 10 Tax Breaks,
On The House. Visit the
Internal Revenue Service's website
for more details on each item.
- Mortgage Loan Interest:
The Mother Of All Tax Breaks, because
interest payments comprises a large portion of your mortgage payment in the
early years of the loan's term, mortgage interest on a maximum of $1 million
in mortgage debt secured by a first and second home is deductible. Deductions
reduce your taxable income against which your taxes due are calculated. The $1
million level applies to married tax filers who file jointly and single
taxpayers. Married taxpayers who file separately split the maximum equally.
Likewise, home equity loan interest is deductible, but limited to the smaller
of $100,000 (half as much for each member of a married couple if they file
separately), or the total of your home's fair market value as determined by a
complicated formula you may need a tax professional's help to decipher.
- Home Improvement Loan Interest:
The interest on a home improvement loan
is also deductible, but calculated differently. You can deduct all the
interest on a home improvement loan provided the work is a "capital
improvement" rather than repairs, maintenance or cosmetic upgrades. Capital
improvements typically increase your home's value (say, because you added a
room), prolong it's life (a new roof) or adapt it to new uses (universal
design improvements to assist older people or people with disabilities). You
get tax benefits from repair work (painting, repairing, etc.) only when you
sell your home but you can use a home equity loan to make repairs and deduct
the interest -- up to the limits.
- Points:
Points, each equal to 1 percent of the
loan principal, are charged by lenders as part of the cost of the loan. You
can fully deduct points associated with a home purchase mortgage, but not a
mortgage broker's commission. Refinanced mortgage points are deductible too,
but only when they are amortized over the life of the loan. Once you refinance
a second time, the balance of the old points from a refinanced loan offer an
immediate write off, as you begin to amortize the new points.
- Property Taxes:
Property taxes or real estate taxes are
fully deductible. Any local city or state property tax refunds reduces your
federal property tax deduction by the same amount.
- Capital Gains Exclusion:
Home buying investors' best tax shelter
comes from provisions in the Taxpayer Relief Act of 1997
which allows married taxpayers
who file jointly to keep, tax free, up to $500,000 in profit on the sale of a
home used as a principal residence for two of the prior five years. The amount
is halved for those filing single or separately. You can use the benefit as
often as you qualify.
- Home-Based Business Deduction:
Home offices that use a portion
of your home exclusively for business could qualify you to deduct a percentage
of costs related to that portion. Included are a percentage of your insurance
and repair costs, utility bills and depreciation. Under clarified provisions
of the Taxpayer Relief Act of 1997, if your home office qualifies, you
don't have to allocate a home sale's capital gains between the home and the
business.
This provision does not excuse you from a
recapture tax if you've taken a depreciation deduction because of the
home-based business.
- Selling Costs and Capital
Improvements:
When you sell your home, you can reduce
your taxable capital gain by the amount of your selling costs, which include
real estate commissions, title insurance, legal fees, advertising and
inspection fees. Cost typically stemming from decorating or repairs --
painting, wallpapering, planting flowers, maintenance, and the like -- are
also selling costs if you complete them within 90 days of your sale and with
the intention of making the home more saleable. Selling costs are deducted
from your gain. Gain is your home's selling price, minus deductible closing
costs, minus selling costs, minus your tax basis in the property. Your basis
is the original purchase price, plus the cost of capital improvements, minus
any depreciation.
- Moving Costs:
A move triggered by a new job comes
with some deductible moving costs. To qualify, you must meet certain
requirements including, moving within one year of starting your new job,
moving 50 miles farther from your old home than your old job was and working
full-time at the new job for 39 of 52 weeks following the move. Deductions
include travel or transportation costs and expenses for lodging and storing
your household goods.
- Mortgage Tax Credit:
Mortgage Credit Certificates (MCCs)
allow qualifying low-income, first-time home buyers to take a mortgage
interest tax credit of up to 20 percent (the amount varies by jurisdiction) of
the mortgage interest payments made on a home. This credit is available every
year you keep the loan and live in the house purchased with the certificate.
Unlike a deduction that reduces your income, the credit is subtracted, dollar
for dollar, from the income tax owed. For example, with a 20 percent tax
credit, if you paid $10,000 in interest, your tax credit would be $2,000. If
you owe $2,000 in income taxes without the credit, you would end up owing
nothing to the IRS after the credit was applied. The remaining 80 percent of
your mortgage interest -- $8,000 -- is taken as a normal mortgage interest
deduction.
- Energy Tax Credits:
The newest home-based tax credits were
made possible last year by the Energy Policy Act of 2005. Tax credits
of up to $500 in later years are available for upgrading heating and air
conditioning systems, insulations, windows, doors and thermostats, caulking
leaks, installing pigmented metal roofs and for otherwise putting the bite on
energy waste in your home. Qualified solar energy and fuel cell systems can
net tax credits of up to $2,000. Some states also offer tax credits or rebate
deals that could reduce the federal credit. Related tax credits are available
for consumers who buy alternative- and clean-fuel burning cars and for
entrepreneurial consumers who install clean-fuel vehicle refueling property at
the principal residence of the taxpayer.
-- A Renters Story - -
- Own The Home Of Your Dreams -
- And In Many Cases, For Nothing Down -
As they sat
down to eat dinner, Liz exclaimed -“Jerry, I’ve had it, I refuse to pay one more
penny in rent. We’ve been paying rent now for 4 years and I think it’s about
time that we stop making our landlord rich and start putting some of this money
into a home of our own. What do you think?”
Jerry thought for a moment and nodding his head slightly,
he
responded “Liz, it would be wonderful to own a home of our own, but where are we
going to find the $10,000 we need for a down payment? We’ve been trying
to save for 14 months now and so far all we’ve got is $1000. It seems like every time we start to get a little saved something goes wrong -
the car needs tires, or something breaks. I mean at the rate we’re going it may be another 20 years before we have enough money saved for a down payment,
and by then homes are going to be so expensive that we probably won’t be able to afford it
then either.” The conversation went back and forth for about 15 minutes. At the end of it, they realized that they needed answers to lots of questions. How much money would they
really need for a down payment? Was it even possible that they
could own now?
Later that evening Liz remembered that she just received a card in the mail from a real estate agent named Gladys. Liz also remembered seeing a sign at the bank about some kind of home loan. She thought to herself
"those 2 seem as good a place to start as any." So, early on her way to work the next morning Liz decided that she would call Gladys first. She figured Gladys might also know something about the bank loan.
In talking to Gladys for a few minutes she was told that they would need
at least $8,000 for a down payment, and that she really didn’t know anything about the bank loan.
Then Liz figured, “Well let me call the bank and see what that loan is all about.” She called and was a little disappointed when they told her that she would
need $12,500. “How can I get such vastly different answers to the same question” she wondered. “Besides, where are all those special home loan programs for first
time home buyers that I’m always hearing about?” At this point Liz was getting
discouraged. She had no idea what to do next or where to turn. What she didn’t
know however, was that her luck was about ready to change.
The next day during lunch, Liz was
sharing her frustration about buying a home with Kim, a co-worker. Kim had recently
purchased a home of her own and had a copy of her agent's newsletter.
While flipping through the
newsletter, Liz saw an article that almost caused her to jump. The ad was offering a free report –“Own The Home Of Your Dreams For
Zero Down Payment.” Liz thought, could this be for real?
Liz called the recorded message and
ordered the free report. Two days later when the report arrived they were
ecstatic. They could not believe how many different ways there were to own a
home that they didn’t know about, and they didn’t need a ton of money either.
Three weeks later they found a home and bought it. When the seller handed
them the keys to their new home, it was obvious that this was one of the
proudest and happiest moments of their lives.
Never again would they ever have to waste another penny on rent.
Of course, this was only possible because they decided to call The Home Team for
advice. Don't waste any more of your hard earned money on rent.
After all this....just
Tell Us What You Want!
When you’re ready to buy or ready to sell, we’re ready to
listen.
RE/MAX agents average more experience and more sales than other
real estate agents.
That’s because we treat every transaction the same way our clients and
customers do – like it’s the most important transaction in the world.
We’re waiting to help make your real estate dreams come true.
Just tell us what you want!
