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Tax Deductions and Appreciation

By
Real Estate Agent with Prudential CT

 

TAX DEDUCTIONS AND APPRECIATION

  • Tax deductions: Although they're the stuff that bill-paying grumbles are made of, mortgage interest and property tax obligations are a homeowner's best friend come April 15. For both federal and state income taxes, these payments are usually fully deductible. And in the first years after a home purchase, most of the money paid toward those mortgage payments represents interest. Think of it as a government subsidy on the purchase. In addition, many closing costs, such as points paid and fees for your loan application and appraisal, may be deductible, either immediately or down the line when you plant that "For Sale" sign in your lawn.

 

  • Appreciation: We're talking about the financial kind. Homes are considered a safe, steady investment, with values that rise while debt amount drops. The national median home price has risen every year --even during recessions and periods of sales declines -- since 1968, when the NAR began tracking it. Typically, the values appreciate at the rate of inflation, plus 1 or 2 percentage points. Sometimes it's a greater increase. In 2004, for instance, the median price went up by 9.4 percent. A long-term investment?  For example, a buyer who makes a 10 percent cash down payment with an annual home appreciation rate of 5 percent could expect a 94 percent return on the cash after three years of homeownership . After five years, the return increases to 225 percent, and after 10 years, a whopping 623 percent.

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