Owning vs. Renting: What are the Advantages?

The main advantage of ownership over tenancy is each monthly mortgage payment you make goes toward building up more valuable equity in your home, as opposed to paying a landlord. And, if the real estate market goes up, then you are also building more equity into your home.

There are also significant tax advantages to owning a home. Mortgage interest and real estate taxes are tax deductible and therefore serve to lower your taxable income. For many homeowners this is a big deduction since the interest portion of mortgage payments is substantial, especially in the early years of owning a home.

For these reasons, I usually advise my clients to own rather than rent, but I wanted an experienced professional to weigh in on this issue, so I sought the advice of a trusted CPA, Howard Weintraub of Weintraub & Associates, LLP. Howard agrees that in most cases it makes more sense to buy. By owning, he explains, you could save 25 cents of every dollar against your income tax assuming you are in the 25% tax bracket. So, don't throw your money away on rent.

To illustrate the point, a married couple making $120,000 would pay $24,925 in taxes as renters, but if they could deduct mortgage interest and real estate tax, their income tax payment would be closer to $18,700 (depending on several factors). 

To sum up the benefits when you buy a home: you receive tax deductions (on the mortgage interest and real estate taxes), along with capital appreciation (as the value of the home increases after the purchase). Depending on your tax bracket, that can amount to a significant savings. 

Give the Leogrande Team a call if you would like more details and are thinking of buying a home. And just like you would use a knowledgeable realtor, think about engaging an experienced CPA or Tax Advisor. I recommend Howard as a trusted resource to run the numbers and discuss the tax implications including your available cash flow to afford the house you want.

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