The numbers speak for themselves.  It is more costly to rent than to own.  In the end, tax deductions from owning your home will save you money.  Read on for a detailed calculation on a $300,000 purchase.

RENT

2 BDR – $2,000/mo

Renter’s Income = $100,000/annual

Income taxes (30%) = $30,000/annual

$30,000/12 = $2,500/mo payment of income taxes

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OWN

3 BDR – $300,000 Purchase Price – Single Family Home

Down Payment (3.5%) FHA – $10,500

Closing Costs (3%) – $9,000

Loan Amount – $289,500

Loan-to-value Interest Rate (4%)

$289,500 x .04 = $11,580

Annual Mortgage Interest Deduction – $11,580

Annual Property taxes (1.17%)

$289,500 x 1.17% = $3,387

Annual Property Tax Deduction = $3,387

First Year Deductions Includes Closing Costs, Property Taxes, and Mortgage Interest

$9,000+$3,387+$11,580 = $23,967

First Year Deduction = $23,967

Second Year and Successive years deduction includes Property Taxes, and Mortgage Interest

$3,387+$11,580 = $14,967

Second Year and Successive Years Deduction = $14,967

               -$23,967

$76,033 – pay taxes on new income amount

$76,033 x 30% = $22,810 – new income tax payment

First Year Income Taxes – $22,810

$30,000-$22,810= $7,190 Savings

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Income $100,000

                -$14,967

$85,033

$85,033 x 30% = $25,510 – new income tax payment

Second Year and Successive Years Taxes = $25,510

$30,000-$25,510= $4,490 Savings

Monthly Mortgage Payment on $289,500 – $1,970/mo

Principle and Interest – $1,382

HOA – $31

Homeowners Insurance – $75

FHA Mortgage Insurance – $200

Property Taxes – $282

= $1,970/MO

$1,970 – $374 = $1,546/MO – Payment –Savings- 2^nd Yr

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It will take 1 year and 8 months to recoup the down payment of $10,500 from the monthly savings of owning versus renting.  If you have any questions, or comments, please call us at (619) 246-8400.