Homeownership endures as the foundation of the American dream, and that’s why the home building industry is celebrating National Homeownership Month in June. The benefits of owning your own home are numerous — for you and for your community. You build financial strength and emotional well-being for you and your family, and at the same time, as a home owner, you promote increased stability for the surrounding community.
Homeownership is Key to Household Wealth
Building equity and accruing wealth when the value of your home appreciates are among the longer-term financial benefits of homeownership. The home equity you build increases your net worth.
According to the 2016 Survey of Consumer Finances (SCF), nationally, the primary residence represents the largest asset category on the balance sheets of households. At $24.2 trillion, the primary residence accounted for about one quarter of all assets held by households in 2016, surpassing other financial assets (20%), business interests (20%) and retirement accounts (15%).
Tax Benefits of Homeownership
Home owners can take advantage of several sources of tax savings, including:
• Deductions for mortgage interest
• Deductions for real estate taxes
• The capital gains exclusion for the sale of a principal residence
Mortgage Interest Deduction
Home owners who itemize their federal income tax deductions can deduct 100 percent of their mortgage interest payments on a first or second home for up to $1 million of mortgage debt. The Mortgage Interest Statement Form 1098, which home owners receive from their lenders, shows the total amount of home mortgage interest paid during the year. Homeowners also can deduct the interest paid on up to $100,000 of home equity loans. For most home owners, this means they can deduct all of the mortgage interest they’ve paid on their home each year.
Real Estate Tax Deduction
Home owners are able to deduct the state and local real estate taxes they pay each year on an owner-occupied home.
Capital Gains Exclusion
When it is time to sell a home, in many cases home owners don’t have to pay capital gains tax on the profit from the sale. Under present law, married couples who have owned and occupied their principal residence for at least two of the past five years do not have to pay any taxes on the first $500,000 in profits from the sale of their home. Single filers earn up to $250,000 tax free.
There Really is No Place Like Home
Although there are many positive financial aspects to homeownership, a home cannot be valued in monetary terms alone. Not only can homeownership be a stepping stone to greater financial well-being, it provides a permanent place to call home and great personal satisfaction. Academic research also shows that homeownership provides a wide range of social benefits and strengthens the nation’s people and its communities.
Homeownership is truly a cornerstone of the American way of life!