Freedom and owning a home
It's summer, its hot, termites have discovered your deck, the palms need to be topped and your air conditioner is blowing out hot air. By now you're wondering, "Why do I own a home?" Well, I'm here to tell you the benefits for both your lifestyle, your bank account and the freedom to enjoy the American dream, which we just celebrated.
Cultural thinkers have always told us that owning a home is associated with less crime, better health, better education and generally more of a social and neighborly population. In addition owning your home has always been the best way to accumulate wealth for the average person, since even if your home doesn't appreciate during the time you own it, which it historically does, paying down a mortgage is a forced savings.
Most everyone who has a home mortgage knows they can deduct the interest on that mortgage up to $1 million dollars for a joint filing and $500,000 for a single filing. This deduction is eligible for both first and second homes. But many homeowners don't fully understand the capital gains laws as it relates to selling your home.
Capital gains regulations are very favorable for most homeowners and few wind up owing any capital gains with the exception of very high end properties in very high priced areas. Married couples filing jointly can exclude as much as $500,000 of the gain on the sale of their primary residence and singles can exclude up to $250,000. This exclusion is applicable on your primary residence, and you must have owned and used it for at least two of the five years before the sale date, but they do not have to be consecutive. You could qualify for an exception to the two-year rule if it involves special circumstances related to your job or unforeseeable events. The other good news is that this is not a one- time exclusion. Homeowners will benefit from the capital gains regulation every time they sell their property as long as it meets the IRS's criteria.
Another nice little benefit of owning a home happens right here in Florida. It's called the Save Our Home Amendment and applies to full time homesteaded residents. Homesteaded residents benefit from a $25,000 exemption of the assessed value of the property as well as a 3 percent maximum cap on any annual valuation increase of homesteaded properties. Basically, this means that your property taxes go up very little during the course of the time you own your home, regardless of how much your home has increased in value.
But there's more; you also will benefit from something called portability, which translates to the ability to transfer the Save Our Homes cap (the difference between your market value and the assessed value) from an existing homestead to a new homestead. There is a mathematical calculation for this, and you do need to complete a form to apply, all of which can be confusing, however, it is applicable each time you move. The portability provision came into effect in January of 2008 and really helps homeowners who want to sell and move up to more expensive homes while still retaining much of the benefit of the cap on property taxes they enjoyed on their previous home. This rule did help the real estate market since it encouraged homeowners to move on freeing up properties to be placed on the market and creating activity.
A few days ago we celebrated Independence Day. One of our basic freedoms is the freedom to live anywhere in the country, and home ownership may be the ultimate freedom of all. Happy belated Independence Day!