5 Tax Breaks That Homeowners Get & Renters Don't

There are a ton of benefits of owning a home: stability, equity and the ability toleverage your home for other goals and investments. Another huge benefit of homeownership is the tax benefits - including both credits and deductions.

If you're looking for one more reason to make 2016 the year you transition from tenant to owner, here are a fast five that you can choose from...
 

Tax Break #1: Mortgage Interest Deductions

Unfortunately, rent paid is rarely tax deductible. Mortgage interest on the other hand, is ALWAYS deductible. According to a recent article by Dona DeZube, at the end of every year, the average homeowner has paid $9,540 in interest on their mortgage.

Add to that the fact that in the first few years, nearly two-thirds of each month's payment goes right towards interest!
 

Tax Break #2: Property Taxes are Totally Tax Deductible

Let's face it guys - the reality of most situations is that your monthly rent is used by the owner to cover a number of costs incurred with maintaining your rental property. There might be a mortgage owed, money set aside for taxes, insurance and for any maintenance, repairs or replacements. Then there are management and legal fees and other associated costs. Whatever is left over is that month's net profit.

See - you're already paying those things, over the length of your lease. You just don't get to write any of it off. Nationwide, that comes up to about $4,420, according to the IRS. If you received this and the average mortgage interest deduction, you've already amassed nearly $14,000 in deductions!
 

Tax Break #3: Points Pay Off

Savvy buyers sometimes use a strategy to lower their interest rates called buying down points. the most common types of points purchased are origination points and discount points. To the IRS, it's basically the same as pre-paid interest. Nationwide, the average value of this deduction is $611.

If you miss this opportunity at the closing table, you can cash in on the benefit later, if you choose to refinance your home.
 

Tax Break #4: Welcome to Long-Form Filing

Unless you're self-employed, many of you file your taxes using the short-form 1040-EZ. That's because without all of these deductions, you would simply not have the numbers to beat the standard deduction of $6,300 for unmarried individuals and $12,600 per married couple.

This also allows you to take other deductions you couldn't on the 1040-EZ like charitable giving, medical expenses and all of those un-reimbursed job-related expenses you rack up over the course of one year.

Sure, it means you'll need to hire an accountant or a tax prep pro, but the good news is that those fee's are deductible too!
 

Tax Break #5: Capital Gains Tax Relief & Why You Want It

We saved this one for last, because if you haven't even bought a home yet, it seems a little silly to start thinking about selling it. However, the chances are that if you buy a home once, you may very well decide to later sell that house and upgrade to a new one or perhaps relocate after a big promotion.

If you take great care of your home, pay down your principal and the passage of time increases your home's value, you're likely going to walk away from the closing table with a check. That check equals capital gains, and the IRS loves to get in on that action. The average penalty is around 15% for capital gains. Real estate, however ,is tax-free on profits of up to $250,000 for a single person or $500,000 if you're a married couple.

If you made $500,000 in the stock market, you'd likely owe $75,000 in capital gains.

This does have rules, chiefly where you have to own and live in the home for 2 of the past 5 years. The only other investment that compares in that sense would be Roth IRAs and other tax-free accounts.

All of these tax breaks can really add up. If you're a Signature tenant and you think now is the time to make your move from tenant to buyer, be sure to sign up for our Resident Rewards Program.