Advantages of Home Ownership

1. Owners can take pride in ownership of the space of their home.

2.  Owners have more control over their housing than those who rent.

3.  Owners are free to design and create a comfortable living space of their choice.

4. Income tax benefits of home ownership:

A. Mortgage interest (interest paid on mortgage loan) is income tax deductible. US government allows homeowners to write off interest payment on up to $1.1 million in mortgaged debt on qualified principal residence. 

B. Points paid (discount points) for mortgage on purchase of a home is income tax deductible.  Any discount points paid during closing of a new home are deductible if they are considered pre-paid interest.  A point is 1 percent of the loan amount.  Fees may be reflected on form 1098 sent by the mortgage company.  Restrictions apply to deduction of points, so you must verify this with your income tax professional.

C. Home loan refinance fees.  Some are income tax deductible.  If you refinance your home loan during the past year, discount points paid in process of refinancing can be deducted over the life of the new mortgage.  If a person refinanced more than once, any loan fees from prior refinance that have not been deducted can be deducted in full at time of most current refinance.

D. Property taxes paid are income tax deductible.  These taxes paid during year are fully deductible on the income tax return for that year.  Money held in escrow toward payment of your taxes is not deductible, but actual payment from escrow account toward property taxes are.  This amount should also be listed on IRS form 1098.

E. Interest on home equity loans are income tax deductible with restrictions.  In addition to mortgage interest, equity loan and line-of-credit interest on loans of up to $100,000 are deductible.

F. If a person is self-employed, possible income tax write off of expenses of home ownership. This relates to expenses related to business use of the home.

5. Equity in home and real property can be used as principal or collateral to support a new loan.

6. Protection from the anticipated inflationary aspect of rent to be paid.

7. Anticipated price appreciation (increase of equity).   

Owners of homes in the United States have experienced more than 15% increase in value of their homes during 12 months ending June 2005. 

California has experienced 5 consecutive years (as of June 2005) where housing price appreciation exceeded 10% per year.

Demand for Housing in California.  There are 100 million acres of land in California, but only 5 million acres can be developed.  With 36.8 million residents (as of 2005), California ranks #1 in population in the nation.  Demand for housing in California remains strong.

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Attribution: California Association of Realtors, September 2005; Gary Watts, Economist, October 31, 2005.

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This information presented by

Harrison & Christi Long

"Explore Pacific" Team

Coldwell Banker

949-854-7747

HKLong@aol.com

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Disclaimer: The information contained herein is not the providing of legal services or services of an accountant.  If a person wants or needs such professional services, he or she must contact and retain counsel or a certified public accountant.  There are risks associated with the acquisition and ownership of real estate.