Do you actually save on taxes if you own residential property as opposed to renting (paying, income)

[Submariner]

Whenever we have had a mortgage, we used it as a write-off on our income tax filings.

Today we live on a farm and we do not have a mortgage. Just about every expense we have is a tax write-off.

We have lived in cities where the property taxes were very high, and in those cases we were able to use the property taxes as write-offs for our income tax filing. Where we live now our property taxes are very low.

The IRS offers free classes every year [taught by IRS auditors], to teach people how to file Income taxes. You must agree to volunteer to help others to prepare taxes that year. My wife and I both took the IRS classes and they helped us a lot. The first year or two, you learn how to use the IRS forms. But after that in later years we got into interesting discussions about lowering your income tax obligations.

[17thAndK]

Uncertainty is a hallmark currently. No one knows which way we'll careen next. The only sure thing seems to be that massive power outages will continue in Puerto Rico.

[StealthRabbit]

Originally Posted by rjm1cc

Yes, but if you have to spend cash of $100 to get a $10 tax deduction you might not come out ahead. You have to total all your costs.

Another problem is that you have to itemize deductions and if you do that you do not get a standard deduction.

You get a deduction for interest on a mortgage and property taxes. Some states let you deduct some property tax when you rent on the state return.

Originally Posted by mathjak107

what are you referring to ? are you talking about as an investor in an investment property or as an owner of a resi home living in it?

if you are talking about your home you live in odds are the renter has a better tax deal .

most renters do not spend anywhere near the standard deduction in deductible items ,especially a couple unless living in a very high cost state .

so while the homeowner (spends) for mortgage and real estate taxes , ... the renter likely spent less and(gets the advantage of) the standard deduction getting money back they never spent in deductible items .
...
remember we are talking tax wise which is what the op is asking about , not overall cost of renting vs buying .

^^^ Follow above advice / insight in your decision / rationale ^^^

We don't have enough info on YOU and your region (Income and Costs + tax rates (Local / state / federal))
Run your total tax scenario (as an owner / as a renter) it is very dependent on YOU and your INCOME / spending / and STATE of residence.

I am of the mindset a primary residence is truly a Liability, and seldom an asset. A primary residence performs as a liability while you live there, and only an asset when / if you sell it for gain. (Not always possible to get a gain)

A possible way to OWN and be tax advantaged is to own multi-tenant property, BUT... when doing so it is still often a better tax strategy to live elsewhere (Than your own multi-tenant property)
Example... If You are able to work from anywhere or retired... You can LIVE / work / domicile in a no- income tax state, or better yet... a US Protectorate (no federal income tax) very cheap...(outer areas of US Virgin Islands / North Marianas / Guam...). https://everything-everywhere.com/ev...united-states/

Keep your income property in one of the 5 Income tax free US states within a region of HIGH rents (Seattle / equivalent) - or wherever you get the best NET returns (I get my best from TX.. high rents, low property values and reasonable taxes / expenses (if you are VERY selective on your property holdings and tax authorities))

As investment property owner... (And filer of US income tax)
1) You will realize 100% deduct-ability of expenses against earnings (rather than 10 - 20% as an owner / occupant)
2) You get substantial depreciation deductions that can offset your total income... +/- (ask Donald T)... or just ask to see his tax returns...
3) You can possibly replace / reduce your need to work for wage income +/- (with enough of the correctly performing income property)
4) Income Property will typically be paid off much faster than your primary residence which allows additional future financial freedom

the downside... many will jump in here... but... Income Property is yet another responsibility. (I prefer income property without bedrooms / or bathrooms!)

As with any financial choice... layout ALL the numbers (capital costs / expenses / taxes...) then choose what best fits you and your family / financial objectives. For some of my kids, I recommended buying... others / renting. (they didn't all adhere.. (as expected), but they did hear me and responded best for their situations.

If anyone (usually a banker or realtor) exclaims "You are better off buying than renting!" ...this is a perfect opportunity to educate them! Run ALL the numbers and SHOW ME! (don't forget costs of acquiring and selling / taxes / maint / cost of capital / insurance / hassle factors)

[Checkered24]

I just take the standard deduction so I am unable to write off my property taxes. I just do not have enough things to itemize and beat the standard deduction.


Keep in mind though there are other potential financial advantages to owning instead of renting besides tax deductions.

[Submariner]

Originally Posted by rjm1cc

Yes, but if you have to spend cash of $100 to get a $10 tax deduction you might not come out ahead. You have to total all your costs.

Nobody is suggesting that you spend $100 to save $10.

However we look closely at investments, we only invest in things that pay us back and will also provide a write-off.

We have itemized our Income Tax filings for over 35 years, it helps us.

[Hemlock140]

We have no state income tax, and can deduct sales tax on major purchases like cars and RVs from our federal tax. We have itemized since 1978,and the various mortgages have always provided deduction, but the real money that the renter doesn’t get is when selling. On our first house we sold for $55k more than we paid, the second $84k more, and our current house is now worth $510k more than we paid. The other advantage is the mortgage payment stays the same as long as we have the house, while income goes up. Renters have increases, sometimes every year, often more than their pay went up.

[NJ Brazen_3133]

Originally Posted by mathjak107

what are you referring to ? are you talking about as an investor in an investment property or as an owner of a resi home living in it?

if you are talking about your home you live in odds are the renter has a better tax deal .

most renters do not spend anywhere near the standard deduction in deductible items ,especially a couple unless living in a very high cost state .

so while the homeowner gets to take a deduction for mortgage and real estate taxes , they are spending those dollars . the renter likely spent less and flies the empty seats of the standard deduction getting money back they never spent in deductible items .

so from just a tax perspective most renters will do better since they tend to eat up less of the standard deductions.

remember we are talking tax wise which is what the op is asking about , not overall cost of renting vs buying .

I own a condo, but I dont live in it. I dont rent it either. I let my grandma live there for free because it is close to father. I rent an apartment to live in. But if grandma dies, should I sell, move into it, or rent it out? And even if I eat up less of standard deductions, can I not still be taxed more or less depending on my actual earnings?

[galaxyhi]

No.

But we don't have enough deductions to exceed the standard deduction.

But we got NO (As in ZERO) deduction for renting either.

It's not about tax gain. It's about pride of ownership, it's about no one can take it away from us, no one can refuse to renew our lease it's about a payment that is lower than renting comparable, it's about costing about as much as renting as we did before.

We did own a mobile home. But rented the lot. At any time the park could refuse to renew our lease, and we'd be landless or homeless. Our mortgage is only slightly higher than our land only lease for the lot. We saw nor got any additional value doing that. Rent automatically went up $25-50/month every year for getting absolutely nothing more.

To buy another mobile, plus pay lot rent would be about double our mortgage on this house. To rent an apartment it would be half again more than our mortgage, to rent comparable house would be double our mortgage.

So Why OH why would we go through that again? Student when owning is cheaper?

So damned the tax deduction, we'd rather own than risk being thrown out to the wolves at any time.

[17thAndK]

Originally Posted by Checkered24

Keep in mind though there are other potential financial advantages to owning instead of renting besides tax deductions.

If you rent, your monthly payment is a consumption expenditure made in exchange for residential services. You pay that as an owner as well, but you pay a further tranche that is an investment expenditure made in hopes of earning tax breaks, asset appreciation, and ultimately realized capital gains. Like any other, the investment may turn out to be a good one or not. It has turned out well for an awful lot of people over the years though.

[Peasy973]

For perspective, I purchased a condo a few years ago. I'm a single guy and before my purchase I never got as much back from my tax return as I do. I'm not sure about particular but before you decide you're going to sell talk to a tax professional so you know everything that can happen to you tax wise.