Tax Advantages of Buying Real Estate

Let's face it. Everyone hates taxes. No one likes to pay a large sum after they have just spent money on Christmas Gifts and New Years Eve night on the town. I am writing you this article in hopes that it helps you understand how investing in real estate can work to your advantage when it comes to tax breaks.

How Can Real Estate Save Me Money

The Typical Payments in Real Estate:

  • Mortgage Payment Real Estate
  • Taxes
  • Improvements to Your Home
  • Homeowners Insurance

Believe it or not, all of these in some way can help you SAVE MONEY! With a Mortgage Payment with a 30 year loan on a $100,000 home at 5% interest, the payment would be around $537 dollars per month in Mortgage Payments.

Your real estate tax payment will depend on where you live. Lets say $2,000 per year. (Cut this almost in half if you can file for Homestead Exemption) Your Insurance would be close to $500 per year. (Again, depending where you live.) There are some Real Estate Home Improvements that you can write off as well!

The typical Improvements you can write off are energy efficient improvements. (30% residential energy property credit; ask your accountant for more information.)

So if you add the monthly mortgage payments, taxes, and insurance it comes to:

  • Mortgage Payment: $537/ month
  • Insurance: $42/month
  • Taxes: $167/month
  • Total:$746/ month

The fun part:

Usually you would pay $800 per month or MORE if you were to rent a home that is valued at or around $100,000. Out of the $537 payment per month, about $413 consists of interest per month in the first year. This means that out of the $746 per month...Around $623 is tax deductible. If you are in the 25% tax bracket, this means that the $623 will be a total savings of about $155 in tax savings per month.

This means that even though you are paying $746 per month: in all actuality, you are paying around $591 per month! Not to mention the $1,475 you will have in your Equity Piggy Bank!

I hope you can see that by investing in real estate, you pay less per month per year and you save money in your Equity Piggy Bank every year!

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