This age old expression has been widely used for years. Its application extends into the real estate arena as well. It is noteworthy, though, that when it comes to investment and financial freedom, pride should have nothing to do with the decision to own a home.
In previous articles I have commented on the many avenues to wealth that real estate investment affords. Even when it comes to one’s personal residence, it’s good to think like an investor. Since a healthy percentage of U.S. voters also own their homes, it stands to reason that many laws would be in place that protect and assist these homeowners. And that is exactly what has occurred!
It’s obvious that Federal tax laws favor citizens that have a mortgage. While a person’s rent payment is not tax deductible, over 90% of a homeowner’s mortgage payment is deductible. This deduction normally exceeds the standard deduction, providing the homeowner with a significant tax savings. This is money that goes directly in the homeowner’s pocket.
Added to this tax savings, you have the depreciation factor to take advantage of. Congress allows homeowners to deduct the improved value of a home from their taxes over a period of a few years. Since this is often 75% of the purchase price, homeowners are able to put even more money in their pockets.
Another shelter that government has granted to homeowners is the one that allows for an exemption when their primary residence is sold. This shelter happens to be my favorite. Every few years you can sell your home and any profits from this sale are tax free.
However, there is a stipulation; you have to live in the home for no less than two years of the previous five years in order to qualify. Every time you do this you are allowed to enjoy gains of up to $250,000 and married couples will be able to gain $500,000 without having to pay taxes on the profit from the sale of their home.
How about that?! There really isn’t much more one has to do to qualify for these advantages. This is a sure way to financial independence if one follows the “buy low, sell high” principle. Today’s real estate market is positively the best in decades for doing just that.
So, the wisdom of homeownership is clearly measured in dollars and cents. Pride should not be a consideration in making decisions that will affect your financial future. However, if you like, be proud that you had made your single best economic move when you decided to buy your home.