What are the tax advantages on renting vs. buying? or vice versa
Answers
2709 points
Oldman answered 10 months ago …
If you buy, some of the costs of ownership( property taxes and mortgage) interest may be deductible on Fedearal tax 1040 schedule...If you rent, these "home-ownership" tax benefits, don't exist...but you don't have the costs, either.
first rule: Don't invest for tax benefits
2nd rule: There are sites at MSN Money and elsewhere to calculste the true costs of home-ownership vs. renting...Do some research, because if you need to move, unloading a property can be annoying, and much more costly than breaking a renter's lease.
3970 points
EthanR answered 10 months ago …
As far as I know, there are no tax advantages to renting. When you buy a home, you are able to claim your mortgage interest, as well as your homeowners taxes on your Federal income taxes, providing that you itemize your deductions, rather than taking the standard deduction.
Some articles claim that renting is financially advantageous during the first few years, but that the longer you live in a home, the more advantageous it is to own rather than rent. It is often hard to know how long you will live in a home, as life events (career, military, marriage, death in family, etc.) can alter people's plans. However, if you are fairly certain that you will only be living in an area for 2-3 years, I would suggest renting. Longer than that, I would suggest you buy a home.
951 points
Grudun answered 10 months ago …
Some states, such as California, have a renters tax credit or deduction. But normally this is so small that it is hardly worth considering(in CA it is only around $50 or $100 and is eliminated if you make a reasonable living).
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SallyG answered 10 months ago …
IMHO, buying or renting shouldn't be a tax decision, but a personal choice (assuming you have the resources to do whichever you want).
Buying requires a big up-front investment (we've seen what happens when mortgage lenders ask for too small a down payment) and has more costs than just the mortgage: there are property taxes, heat and hot water costs, maintenance, landscaping (unless you're purchasing a condo, townhouse, or co-op). There is no superintendent or landlord to make repairs, which means you'll either have to pay to have it done or do it yourself. Even with my father being skilled in home maintenance and taking care of routine landscaping chores, my parents estimated a few years ago that it took them $13,000 to keep their house running.
Of course, as an owner, you don't have to concern yourself with getting approval for changes that you want to make, or not being able to make them at all, having your residence being sold to another landlord, and you can decide, for instance, to have your roof patched or replaced, or to postpone any repair until you save a bit, and not have the decision made by a condo board or the landlord, who at some point not of your choosing may raise the rent to cover those expenses.
When purchasing, you are investing, and the price of the property may go up-but recently that has become something on which you can't rely. When you rent, you generally pay a more consistent price, don't have a property at the end, but you also don't have the responsibility of maintenance.
All in all, I think it is more a lifestyle decision than a tax-based or financial decision. This society seems to just assume that part of the American dream is to own a house, and that doing so or not comes down solely to economics, but I think that questioning the "accepted way" generally leads to a better personal decision: even if your decision is, in the end, to follow the "accepted way", you will have evaluated choice to find what suits you best.
