| There are many reasons to own property. These vary by the type and use of the property you own. For the best evaluation of your financial and tax situation, consult your financial or tax advisor. He/she will be the most qualified to discuss the financial and tax consequences of a purchase decision. The following are generalized statements.
Tax Deductions
You can deduct the cost of your first and second home mortgage loan interest from your state and federal income taxes. Since interest will generally account for most of your payment during the first half of your mortgage, the savings can be significant. Some of your closing costs can be taken as deductions, as can points paid up front at the time of closing. Similar deductions as well as other costs of ownership such as depreciation can be deducted for investment property.
Tax Deductibility Of Property Taxes
Property taxes are generally deductible on your income taxes.
Appreciation Potential And Leverage
Real estate is considered a good long-term investment because it usually appreciates in value. This applies to your personal residence as well as investment properties. By leveraging your money in additional properties you can leverage your appreciation to multiple properties.
Capital Gain Treatment
Congress allows preferential tax treatment on gains from capital assets held for more than one year. For your personal residence a significant amount of capital gains may be excluded from taxation.
Principal Accumulation
Mortgages are designed to pay the interest for the time the money has been used, as well as to retire the principal debt over a period of time. This means part of the payment each month is for the principal accumulation.
Personal Enjoyment
Pride of ownership is a valid reason for wanting to own any property. You can personalize your own home while enjoying the financial benefits. You can acquire wealth by owning investment property.
The waiting game is a losing game. Don't put off buying a property thinking prices will come down. They aren't likely to.
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