In today’s economy owning a home appears to be the best way to live, create wealth and secure a good retirement. I rest my case with two or three reasons: tax write-off from the interest on your home loan and your property taxes, and the fact that most real estate increases in value because of demand, supply, inflation and government regulations.
The tax law on the sale of your owner occupied house that is currently in affect can help you create an estate that most Americans could only dream about a few decades ago.
I will explain my case so that nobody can say they didn’t know. The write-off of your mortgage interest that is part of your monthly payment (the other part being the principal pay down) and your property taxes are tax write-offs that lower your state and federal income taxes. Generally houses increase in value because of inflation which forces prices up for the materials that are used to build your house. This means that each year and each decade require a higher price to build a house and thus a higher price when you sell your house. The supply of homes usually diminishes by the neighborhoods that are more desirable forcing prices up as well. Even when we go through hard times, recessions, the prices of homes can drop but almost always the prices recover and the upward climb continues.
The best thing the government has done recently for homeowners is to allow a single homeowner who has lived in his or her owner occupied home for two years before they sell it. The single owner gets the first $250,000 in profit without being taxed by the Federal government. If you are married you receive a $500,000 exclusion from taxes on the sale of the house, again if you have lived in it for two years.
If you have 4 to 8 years with a mission you can become a millionaire by selling your houses every two years. If you are single you need to do this 4 times and pocket $250,000 each time from the profit. If you are married you need to only sell the house and put $500,000 in the bank each time. Now you have seen the bright side of the picture, but that usually doesn’t happen
Most people will have to be in their house for 5-10 years to get that much profit from the sale of
their house. So instead of 4 great sales for and individual and 2 for a couple it could easily be
double: 8 for a single person and 4 for a couple. It really totally depends on how driven you are. If you are a handy person who can do a lot of the fix up work yourself it will go quicker because you will be doing it and it won’t cost too much.
If I were a young man my future would depend on a steady job and most of my free time fixing
up my house so equation will work for me.
CAUTION: The Federal Government is in heavy debt and their generous tax plan for those
who are selling their owner occupied house could end at any time. They also could modify
it by extending the holding period of 2 years to maybe 4 years. They could also cut down the
amount of profit that doesn’t get taxed. If you are really anxious to do this