Top 5 Financial Benefits of Owning a Home

Learn the major financial benefits of homeownership. Plus—4 tax saving tips for savvy buyers.

Laura Adams, MBA
5-minute read
Episode #252

The Best Accounts to Grow Your Nest Egg

Benefit #5: Saving Money on Taxes

Yes, homeowners have additional expenses such as property tax and maintenance. However, the following 4 costs are tax-deductible if you itemize deductions on your tax return:

  1. Mortgage interest: You can deduct the amount of interest you pay on your home loan each year up to a total of $1 million of debt. If you also have a home equity loan or line of credit, the interest you pay for it is also deductible up to $100,000.
  2. If you want to know more about who’s entitled to claim this valuable deduction, check out the Mortgage Interest Deduction FAQ Video at SmartMovesToGrowRich.com. You’ll find out what’s permitted in different situations, like when you buy a home with someone else or make mortgage payments but aren’t listed on the mortgage or deed.
  3. Points: You can deduct “points,” which is interest you pay upfront at closing for your new home mortgage. This is the case even if you negotiate to have the seller pay points for you.
  4. Property taxes: You can deduct any state or local taxes charged for your real estate. 
  5. Private mortgage insurance (PMI): You can deduct some or all PMI premiums you may be charged when your down payment is less than 20% of your home’s value. You’re ineligible for this deduction if your adjusted gross income exceeds $109,000 (or $54,000 if you’re married but filing separately). 

In addition to these annual tax breaks, one of the biggest tax savings for homeowners occurs when you sell your home. That’s because up to $250,000 of profit (or $500,000 for a couple who files taxes jointly) is not taxed as long as you’ve lived in the home for 2 of the previous 5 years before the sale. This benefit it called the capital gains exclusion and it’s available no matter your age and as many times as you sell a primary residence in your lifetime.

Money-saving tax breaks are fantastic, remember that many expenses—such as homeowners insurance, homeowners association dues, maintenance, renovations, and local tax assessments for improvements, like new sidewalks—are not tax deductible.

Should You Buy a Home?

There’s a lot to consider when it comes to buying a home—both financial and non-financial. It certainly isn’t cheap and could leave you in a bad spot if you need to pick up and go. But if you know you can stay in a home for at least 5 years and want to put down roots in a community, the long-term financial rewards of buying can really add up. 

Get More Money Girl!

If you have questions about buying or owning a home, post them on the Money Girl Facebook page. If you’re on Twitter, be sure to follow me under user name @LauraAdams. Also, if you’re not already subscribed to the Money Girl podcast on iTunes, that’s how most people get the podcast. Subscribing is free and simply means you’ll get each new episode as soon as it’s published on the web.

Download FREE chapters of Money Girl’s Smart Moves to Grow Rich

To learn much more about buying real estate and getting the right kind of mortgage get a copy of my book Money Girl’s Smart Moves to Grow Rich. It tells you what you need to know about money without bogging you down with what you don’t. It’s available at your favorite book store in print or as an e-book for your Kindle, Nook, iPad, PC, Mac, or smart phone. You can even download 2 free book chapters at SmartMovesToGrowRich.com!

Nutrition Zombies: Top 10 Myths That Refuse to Die: (And How to Keep Them From Sabotaging Your Diet)

With Nutrition Zombies: Top 10 Nutrition Myths That Refuse to Die, Monica Reinagel (aka Nutrition Diva) drives a stake through the heart of 10 persistent nutrition myths so you can get on with eating well and feeling fabulous! Monica—a licensed nutritionist and dedicated myth-buster—gives you a brief but fact-filled book so eating healthy isn’t as difficult (or as joyless) as you’ve been led to believe. Buy it today for just $2.99!

More Resources:
What Is the Best Type of Mortgage?
How to Claim the Home Mortgage Interest Deduction
Should You Rent or Buy a Home?
How to Pay Less Tax Using Deductions and Credits
What is Private Mortgage Insurance (PMI) and How Can You Get Rid of It?
How Is the Sale of Your Home Taxed?
FAQ on the Mortgage Interest Deduction (Video)

Image courtesy of Shutterstock


About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.