3 Financial Benefits to Being a Homeowner
- For many, owning a home is the ultimate "American Dream."
- Through homeownership, you can invest in your property for the long term, especially if you plan on raising a family.
- There are three major benefits to becoming a homeowner.
For many, owning a home is the ultimate "American Dream." Homeownership allows you to have a property to call your own, leaving you with a sense of pride, confidence, and security. Through homeownership, you can invest in your property for the long term, especially if you plan on raising a family.
There are several financial benefits related to homeownership. Here are three advantages and reasons to celebrate being a homeowner.
Owning a home is an investment. Historically, the rate of return that comes with owning a home average between 8.6-10% per year. This means that while homeowners live in their homes, the property value could increase along with their net worth each year.
According to the Federal Reserve, homeowners' net worth is 44.5 times higher than renters' net worth. As of 2016, the median net worth for homeowners was $231,400 compared to renters' net worth, which was only $5,200. Also, a home that is paid in full is an asset that can be passed down to children, family members, and future generations, allowing them to have a headstart in building generational wealth.
As a homeowner, you have the freedom to use your home however you please. One way to make extra income by using your home is through house hacking. House hacking allows you to rent out a portion of your home to create additional income. The best part? Homeowners aren't required to count the rental income they receive from house hacking as taxable income. This means that any profits homeowners receive from renting out part of their homes are tax-free.
Recommended Read: Learn more about the financial benefits of house hacking here.
Homeowners are eligible for numerous tax benefits.
One cost-effective tax benefit is the popular mortgage interest deduction. Anyone who purchased a home after December 15, 2017 is eligible to deduct any interest on the first $750,000 of the mortgage when filing their tax return.
Another tax benefit that homeowners can take advantage of is the exclusion of taxable income on a sale of a home. Homeowners may be eligible to exclude up to $250,000 of capital gains when they sell their homes. They must have used the home as their primary residence in 2 out of 5 years prior to the sale and not have claimed the same tax benefit for the sale of another home in the past two years.