The construction of tomorrow starts today here at MVP Consulting Group. Here are some of the reasons why our clients decide to stop paying rent:
- Appreciation: Although real estate moves in cycles, sometimes up, sometimes down, over the years, real estate has consistently appreciated. Many people view their home investment as a hedge against inflation.
- Mortgage Interest Deductions: Home ownership is a tax shelter and mortgage interest is fully deductible on your tax return.
- Property Tax Deductions: Real estate property taxes paid for a first home and a vacation home are fully deductible for income tax purposes.
- Capital Gain Exclusion: As long as you have lived in your home for two of the past five years, you can exclude up to $250,000 for an individual or $500,000 for a married couple of profit from capital gains. You do not have to buy a replacement home or move up. There is no age restriction, and the “over-55” rule does not apply. You can exclude the above thresholds from taxes every 24 months, which means you could sell every two years and pocket your profit–subject to limitation–free from taxation.
- Preferential Tax Treatment: If you receive more profit than the allowable exclusion upon sale of your home, that profit will be considered a capital asset as long as you owned your home for more than one year. Capital assets receive preferential tax treatment.
- Mortgage Reduction Builds Equity: Each month, part of your monthly payment is applied to the principal balance of your loan, which reduces your obligation. The way amortization works, the principal portion of your principal and interest payment increases slightly every month. It is lowest on your first payment and highest on your last payment. On average, each $100,000 of a mortgage will reduce in balance the first year by about $500 in principal, bringing that balance at the end of your first 12 months to $99,500.
- Homestead Exemption: This prevents the forced sale of a home to meet the demands of creditors (however, in most cases homestead exemptions do not apply to forced sales to satisfy mortgages, mechanics liens, or sales to pay property taxes). It provides the surviving spouse with shelter. It provides an exemption from property taxes which can be applied to a home. Allows a tax-exempt homeowner to vote on property tax increases to homeowners over the threshold via bond or millage requests.
