May 23

Want to create wealth? This is one way to do it

Want to create wealth? This is one way to do it
Source: Fresno Bee

In an opinion piece in the Fresno Bee, C.A.R. 2018 President-elect Jared Martin explains why Congress must provide a tax incentive for renters to become homeowners. When Congress created a tax incentive to own a home more than 100 years ago, they understood the value of homeownership in creating and sustaining communities, promoting social stability, fostering educational opportunities, and building wealth.

Making sense of the story 
  • Owning a home is one of the best ways to build long-term wealth, providing both equity accumulation and tax benefits over time. In 2013, the median net worth of homeowner families was $195,400, while the median net worth of renters was $5,400, according to the Federal Reserve. Minorities struggling to get on the housing ladder will also find themselves at a disadvantage, further widening the wealth gap.
  • Homeownership strengthens communities, encourages higher civic participation, boosts children’s educational performance, lowers crime rates, and improves health-care outcomes. Moreover, homeowners bring more stability to neighborhoods because they tend to move less often.
  • Homeownership helps provide predictability. Individuals can enjoy steady and consistent housing costs thanks to the tax incentive that allows them to own a home. That’s because a fixed-rate mortgage payment might not change for 15 to 30 years, while rents typically increase 2 to 3 percent a year.
  • The deduction of state and local taxes (such as property taxes) prevents double taxation. You as a taxpayer do not enjoy the use of money paid to state and local taxes. Therefore, the federal government allows you to deduct these from your federal income taxes. Eliminating this benefit will penalize California more than other states because of our high home prices and high tax rates.

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