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Harold Willig: Tax Benefits of Home Ownership Have Declined for Home Buyers


A recent article in Accounting TodayHome Ownership's Tax Benefits Fade as U.S. Mortgage Rates Plunge,” caught our attention.

“The standard deduction for married couples has risen to $12,600 today from $1,300 in 1971, meaning that the first $12,600 of itemized deductions has no benefit to taxpayers.” So said a report by John Burns Real Estate Consulting LLC, cited in the article.

“The tax benefits of home ownership, which generations of U.S. residents have counted on, have been elusive for typical buyers since mortgage rates started tumbling in 2008," said Burns.

The average rate for a 30-year fixed mortgage was 3.42 % as of the week ended July 14, 2016, compared to 6.63% in July of 2008, according to Freddie Mac.

The current lower interest rate environment means that fewer home owners will get the benefit of the interest expense deduction.

The reduced tax benefits of home ownership may be another reason to buy single-family homes as an investment, as potential home-buyers see less incentive to buy, and more reasons to rent.

“There used to be an urgency to buy a home for the tax benefits, but those benefits for many are gone,” Burns said.

Having fewer people who want to own a house creates larger rental demand - which is one of the many reasons why we like renting single-family homes.

For the full article, please see here.

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