There are some tax benefits in purchasing a home vs. renting. You should speak with a bona fide tax professional and have a tax professional run the numbers to find out what benefits you may qualify for.
Purchasing a Home:
Home Equity Loan Deduction: Homeowners can borrow up to $100,000 against the equity in their home and deduct the interest as an itemized deduction. The money can be used for any purpose, such as paying off high-interest credit card debt. Credit card interest is not deductible.
Property Tax Deduction: Homeowners also get to deduct from their federal income taxes the state and local property taxes they pay on their home.
Deductible home buying expenses: Various closing costs ordinarily involved in a home purchase are also deductible as itemized deductions, including points, prorated interest and taxes.
$250,000/$500,000 home-sale exclusion: Perhaps the greatest tax benefit of owning a home comes when a person sells it at a profit. Homeowners who lived in their home for two of the prior five years prior to its sale need pay no income tax on a substantial amount of their profit – $250,000 for single homeowner’s and $500,000 for married homeowners who file jointly. This exclusion can be used once every 24 months.
14 days of free rental income: Another little known tax benefit of owning a home is that the owner can rent it out for up to 14 days during the year and pay no tax at all on the rental income.
Renting a home:
Home Office deduction: The only tax benefit that a renter can qualify for by virtue of being a renter is the home office deduction. This is a business deduction available to renters who own a business and have a home office they use regularly and exclusively for business purposes.
Of course, the value of the tax benefits of buying a home depends on the state the buyer live in and their tax bracket. Buyers who live in high tax states like New York or California get the most benefit.
Source: Inman News and Stephen Fishman
- Tax Advantages of First Time Home Buyers Explained (doorfly.com)
- Home Ownership Tax Deductions (turbotax.intuit.com)