It is the American dream to own a piece of land and a home. No doubt the average citizen pays a huge price in financing such a home buy and repays loans spread out through much of his own life time. Owning the home bestows the greatest satisfaction. Besides that you also get to build equity over the years and you create something of solid value that you can hand over to the children as you pass away. What has been grossly understated is the huge benefit that homeowners derive through various tax concessions.
Mortgage Interest Deductions
The home loan repayment is conducted in amortized monthly installments. What this means is that one portion of the installment goes to repaying the principal loan amount while the remaining amount pays the interest, insurance and taxes. These payments are usually stretched over a pretty long span of time exceeding twenty years. The payments usually follow a pattern of repaying interest first and then come down to paying the principal amount.
In the first decade of your home loan payments, the lion’s share of around 90% of your monthly installment (averaging $1,200 nationally) goes into servicing loan interest. This itself would have been a huge disincentive to taking finance were it not for the fact that you get tax relief on this payment. The amount paid as interest qualifies for tax deduction, meaning that the entire amount that you pay as interest can be reduced from your tax return. This means you get to pay lower taxes and possibly end up in a lower tax bracket altogether.
Property Tax Deductions
In order to make home ownership more affordable and attractive the property taxes have become eligible for tax deduction. As this is a complicated area the IRS has publicized its rules under cover of a legislation known as publication 530. This information can be googled on the web. You may need professional help from a tax consultant to decide how you file your return incorporating this concession.
Capital Gain Exclusions
Perhaps the biggest incentive is the capital gains concession. The rule says that an individual earning up to $250,000 in profits from selling his home, and joint holders enjoying profits up to $500,000 from the sale of their property do not attract the provisions of the capital gains tax, provided they have stayed in the home for at least two to five years.
Keeping up with home loan payments
To enjoy the full benefits of your tax concessions one has to make every effort to keep up with home loan payments as any default, minor or major has the potential to mar one’s report and credit rating, besides inviting punitive action. If one happens to be in a situation where a financial emergency has created a paucity of funds needed to catch up on payments, you can easily resort to the loan for vehicle title.
The cash loan for title is supported by the collateral of the car’s pink slip or title papers on which the lender marks his lien for the duration of the loan. The car equity loan is called so because the loan delivers up to 60% of the equity dormant in the car. This amount is released in cash and as quickly as the loan is applied. The auto equity loan attracts interest of 25% APR which is considered to be very competitive vis-à-vis many competing products like payday loans. The pawn car title loan repayment is molded to the repaying capacity of the borrower. Anyhow, this is money that will come in handy in keeping your payments up to date and your credit rating high.