Its income tax season again – a big expense nearly all of us complain about.    Many of us just got our W-2s and 1099’s and are working on filing our tax returns.    If you are a renter, you can’t deduct any of your rent from your taxes.   But if you own a home, chances are very good that you can write off all of your mortgage interest and your property taxes.   

For example, a first time home buyer buying a Santa Cruz County home for $250,000

might be able to deduct $20,000 or more – and this deduction comes right off of your gross income.     So if your household income was $70,000 – almost all taxable, in this example, your taxable income falls to $50,000.    I’m not licensed to offer tax advice, but this is like the government paying you back, instead of you paying them.

Here’s a great article you can read: or, if this stuff makes your eyes roll back into your head, just contact me and we’ll go over it together.

http://www.360financialliteracy.org/Topics/Home-Ownership/Buying-a-Home/Tax-Advantages-of-Homeownership

Have you noticed that the price of food is going up?    It is no secret gas prices are way up too.   But, the government excludes food and energy from their “core inflation” calculations.   Rents are going up too.      So, while the government says inflation is low due to the fact the economy is growing slowly, these higher energy costs are working their way into the cost of virtually everything we buy.

The Federal Reserve’s primary goal right now is to stimulate the economy by keeping interest rates low, and they are not paying much attention to inflation.   Consequently, mortgage interest rates are the lowest they’ve been in generations – hovering around the 4% mark for a 30 year loan.

But soon after the economy begins to recover, the government is going to have to come to terms with inflation…and interest rates will go up then.   When interest rates go up, businesses borrowing costs go up, and they pass that right on to all of us.    When there’s inflation, home prices go up too.   Home ownership as a hedge against inflation isn’t getting much attention now, but I bet it will in the next few years.

Combine the inflation hedge aspect of home ownership with low prices and tax benefits, to see if this feels like an opportunity to lock in an affordable home for your family.     My latest buyers often discover their mortgage payments are cheaper than rent.    With prices so low, this is a great time to be a buyer.   But, the process of getting a loan can be challenging.   Just let me know if you’d like help getting pre-approved for a loan.

Click here if you’d like help finding your dream home.

M.C. Dwyer, Copyright 2012