|
Buying
vs. renting: What's right for you?
Pros and cons of owning
your home
Once you’ve bought
a new house, you'll gain from some sizable tax benefits.
In the United
States, Congress and the federal government have encouraged home
ownership by subsidizing it for several generations. Mainly the largesse
has come through income-tax deductions and the special treatment of some
gains on the sale of residential housing. If you’re in the 31% tax
bracket, owning a home with a monthly mortgage payment of about $1,500
is about the same as renting a house for $1,000.
It's a mistake,
however, to think that tax breaks alone make home-buying
more rational
than renting. Your landlord gets many of the same deductions, and one,
namely depreciation, that you don't. You may think you fail to benefit
from those, but you do. You see his or her deductions in your rent. It's
lower than it would have been without the tax breaks. The landlord,
moreover, bears the risk of ownership, the risk that prices will fall
and erode his or her equity.
First-time
homebuyers especially may overlook another consideration. For all the
financial and emotional rewards of home ownership, it carries a heavy
burden of responsibility. That's not merely maintenance or cosmetic
upkeep, either, as costly as it can be.
Legal liability is
a growing concern. Real estate has encouraged American litigiousness
ever since colonial battles over land titles. Where there were once
lines dividing property worth a few dollars an acre, there are now
big-money damage claims. Homeowners can be forced to pay compensation
for a stranger's slip and fall or a tree's damage to a neighbor's roof.
They can even be forced to pay for the environmental cleanup of oil or
other toxins that have seeped onto their property from outside sources.
<<Previous
Next Page>> |
