By Special to the Town Crier
Was there a pained look on your face as you wrote your check to Uncle Sam this year? Or did you have a much smaller return than you would have liked? It’s too late to change the results of your 1999 return, but according to Kaufman and Broad (NYSE:KBH), you still have time to make next year’s return a little less painful.
When it comes to lowering your taxes, home ownership is one of the best options available.
“Many people continue the frustrating life of a renter because they don’t think they can afford a home or because they don’t realize the positive impact it will have on their overall financial standing,” said Robert Freed, regional general manager of Kaufman and Broad’s Northern California region. “Home ownership is the centerpiece of the great American Dream, but many people don’t realize how close they are to realizing that dream.”
Typically, homeowners can take several deductions on their income tax return, all related to the cost of their home, including the interest paid on the mortgage for a primary residence, real estate property taxes, and closing costs and escrow fees in the year the home is first purchased. If your new home includes an office that is used regularly and exclusively as the principal place of business, you may be able to take additional deductions.
It’s important to consult with a professional tax adviser when determining your eligibility for specific deductions and when preparing your tax return.
For a general sense of the positive impact home ownership may have on your financial situation, consider the following hypothetical example: A typical married couple with combined earnings of $64,800 makes a five percent down payment on a $200,000 home and takes a $190,000 loan at an 8.5 percent mortgage interest rate.
During the first year of homeownership, that couple can expect to deduct nearly $16,100 in interest payments, about $2,500 in real estate property taxes and an average of $1,900 for escrow and closing costs from their federal income tax return.
With approximately $20,500 in deductions, they can expect to save more than $3,200 in the first year alone.
Potential savings may be realized from their state income tax return as well, depending on where they live. This is the incremental benefit that would be realized beyond the standard deductions allowed by federal law.
“Why pay rent and continue to build equity for your landlord instead of making a comparable mortgage payment and building equity in your own home?” Freed asked. “What other investment comes equipped with a gourmet kitchen and a cozy family room?”
Families who are considering home ownership for tax benefits or for any other reason should obtain a mortgage pre-qualification. By determining the approximate amount of a potential mortgage, it is easier to determine the potential tax benefits. If a buyer isn’t sure if their financial standing will allow for home ownership, Kaufman and Broad offers a Homebuyers’ Club at no cost which includes consultations with a financial counselor and recommended steps to get on the path toward homeownership.
For a mortgage pre-qualification or for more information about Kaufman and Broad’s communities, call 1-800-34-HOMES or visit the Company’s Web site at www.kbhomes.com.
Kaufman and Broad Home Corporation is one of the largest homebuilders in the United States.
Headquartered in Los Angeles, the Company has operating divisions in Arizona, California, Colorado, Nevada, New Mexico and Texas. Kaufman & Broad S.A., the Company’s majority owned subsidiary, is also one of the largest homebuilders in France.
