Do you get more money back on your taxes when you own a home vs. renting one?

Question

Do you get more money back on your taxes when you own a home vs. renting one?

Answer 1

How much money you "get back" on your taxes does not necessarily have anything to do with whether you own a home.  It depends upon how accurately you fill out your W-4 for the proper amount of withholding.

Of course if your interest and property taxes exceed your standard deduction, you will likely get a bigger refund a year or two after you buy the home until you figure out how to adjust your W-4 allowances to get more money with each paycheck instead of giving Uncle Sam an interest free loan for the year.

Figuring payments, property tax, insurance, and deductions I am paying less for a 3 bedroom home on 1/2 acre than I had been paying to rent a 2 bedroom apartment with no garage.  But I bought in 2002 before the bubble and refi'd down to 20 years early 2005 while interest rates were low.  My withholding is figured close enough I owed less than $150 for 2006 and got less than $150 refund for 2007 (+ stimulus).

Answer 2

Maybe, but not necessarily.  Most renters don't have enough deductions to itemize.  If you own a home, mortgage interest and real estate taxes are deductions, so that will very possibly give you enough to itemize.  If your itemized deductions are more than your standard deduction would be, you pay less tax by itemizing.

Answer 3

Yes because you own something of value, you don't pay taxes on the interest you pay which is the bulk of your house note, and large improvements made to enhance your home can be deductible.

Answer 4

The married standard deduction is $10,000.

If you itemize your deductions, it's only a "better deal" if your total itemized deduction are MORE than your standard deduction. And then the "savings" is only the different between the standard deduction and the itemized deduction.

Real Estate people will try to sell you on telling you that you will get tax savings on the whole amount of mortgage interest that you pay...but honestly, $10,000 is a generous standard deduction.

I'm a tax preparer - and the fact that a client is paying mortgage interest and real estate taxes on a house does not garuntee that they'd pay less tax with it than without it.

It's more likely that bigger the house, and the higher the real estate taxes.  But remember - the actual savings is only the DIFFERENCE between your total itemizations, and the standard deduction.  And then actual tax saving is only the percentage of tax you pay onthe difference.

A couple in the 28% tax bracket, for intstance, if their total itemized deductions $11,000...would only "save" $280 in taxes.  If they didn't own the house at all, or didn't itemize, they could still take the $10,000 deduction.

Answer 5

Assuming that you have the same amount of tax withheld at work, you usually get back more by owning, because you can deduct the mortgage interest and the real estate taxes.  There may be exceptions.

Answer 6

sure you may, and i stress MAY pay less in taxes if you buy a house.

however, tax savings is never a good reason to buy a house.  buying a house is huge and if you only buy it to pay less in taxes it may blow up in your face.

buy the house becuase you WANT it or NEED it. not because you pay less in taxes....and here is why.

if you buy a house and pay $10,000 in interest to the bank the IRS will let you deduct that from your income so you wont pay tax on it. now, depending on your tax bracket you may not have to pay the irs about $2,500 in taxes because of that deduction.  but if you think about it you paid the bank $10,000 to not pay the irs $2,500....so it COST you $7,500 to not pay the irs. that is an expensive tax break.

me, i would rather see that $10,000 and pay $2,500  of it as a tax and keep the rest instead of giving it to the bank as interest.

but let me repeat, BUY a home if you want it or need it or even if its a good investment....just dont do it because of tax savings.  it almost never works because people who cant afford a house get fooled into buying one for tax savings reasons.

Answer 7

It depends on if your itemized deductions are more than your standard deduction. I am married filing joint so for 2007 the standard is 10700. My interest for this year will be 7000. Standard deduction is higher. Most times interest is higher.

Answer 8

YES! absolutly!  it depends what ur interest rate is.. the higher ur interest rate is the more $ u get back..