Many people erroneously view owning property as an increase to their tax burden. Measure 50, approved by Oregon voters in 1997, ties property taxes to assessed value instead of market value. This causes property taxes to increase only three percent per year, which means that your assessed value is most likely still below the market price.
Even despite property tax increases, there are still many tax advantages to owning a home. For example, a homeowner with a 30-year fixed rate mortgage of $200,000 could expect to pay about $10,000 in interest, with an additional $2,400 in property taxes. By itemizing these payments on their income taxes, they can reduce their taxable income by $12,400. The homeowner’s gain is even higher if appreciation on the property is added.
In the Housing and Economic Recovery Act, a first-time homebuyer is currently entitled to an $8,000 tax credit. This credit will reduce taxes or even provide a refund unless the home ceases to be the homeowner’s principal residence within three years from the date of purchase. In addition, a long-time homeowner may now qualify for a $6,500 credit if a replacement home is purchased after November 6th, 2009. This creates a credit for divorced individuals buying new homes.
If you are planning to buy a home in the near future, be sure to calculate the amount of appreciation and tax savings. Just remember that these examples are intended to provide a general idea of how home ownership might be applied to taxes and income. You should always consult with a tax advisor for information relating to your specific circumstances.
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