I've been saving up and waiting for an oppotune time to purchase a house. I believe that will be within a year or so with the market in the state it is in now. I've been speaking with others and they have always said that I should buy now as I will save on my income taxes. I don't see it that way as currently I'm not paying anything in property taxes as I'm renting. I'm saving the money that I would have spent on a mortage which is about double what I pay in rent (southern California) and collecting interest.

Am I right in assuming that there is no real benefit to owning a house as property taxes will offset the "tax savings" that one can write off? I know there are smart people on this forum and I couldn't really find a good answer looking through google.

Technically you are paying property taxes as a part of your rent is likely going to cover part of the tax bill of wherever your renting.

And renting isn't "throwing money away" either as is oft quoted since you are getting a place to live out of the deal.

Realistically in SoCal I don't think you can possibly come out behind if you continue to rent for a while. Ownership has been far more expensive than rents for a long time now (I'm 2000 miles away, but I have friends in SoCal).

Yes and no. Like Goof said, you're paying property taxes either way. It's not like the owner of your property is going to eat the cost of the property tax; it's being passed on to you.

Also, I believe you can write off both mortgage interest AND property taxes on your income tax. Of course, your deductions would have to exceed the standard deduction for it to be worth deducting (and depending on your interest rate, you'd only have to finance around $100,000 to make it worth deducting).

In the end, I don't think you're losing anything by renting, since the housing market hasn't hit bottom. Considering the extra costs you'd be paying to get the house now, it's not worth the tax savings.

solidfusion said: I'm saving the money that I would have spent on a mortage which is about double what I pay in rent (southern California) and collecting interest.

Suppose, there were no property taxes.Would you then consider that you would be saving something if you bought a house? How so, if you were paying twice as much as you are paying now?
If your monthly payment goes up, you are not saving anything, not in that sense anyway. And it has nothing to do with the property taxes.
Your tax savings simply allow you to afford a larger monthly payment (mortgage + taxes, that are deductible too btw) then you would be able to afford if there was no deduction. For example, if your total monthly payment (mortgage + taxes) was equal to your today's rent, then you would effectively be paying less than you are paying now because of deductions.

Is it better to own than to rent then? The generally accepted answer is yes, but it has nothing to do with taxes. The assumption is that the real estate prices go up long term on average, so if you buy a house, a few years later, its value will grow, and you will have made some money (if you sell it promptly for example), but if instead you kept renting for the same period of time, you will not become any richer despite all the money you have paid as rent over the years. This reasoning holds true whether or not you have to pay property taxes, and even whether or not your mortgage interest is tax deductible, and whether or not the real estate market has actually hit bottom yet (if it hasn't, you'll just need to wait a little longer until you have made some money, but it doesn't matter when you actually buy the house - you have to wait either way).

And yes, as mentioned in the above post, the fact that rent increases over time, while your mortgage payment doesn't is another reason

UncaMikey said:
If you have a mortgage, P&I are fixed, but our property taxes used to go up 10% (max allowed by state law) every year, much less than the rent increases we've seen.

Well ... yeah ... But, not sure about rates and prices in your area, but where I live, the taxes I pay for a year would hardly cover a month's rent of a comparable residence ...
Yes, they keep going up, and yes, the grow faster than rent in %, but the absolute dollar values just don't compare.

fboyfboy said:This is why it is important to buy low. With Prop 13 (OP is in CA), a lot of homeowners are just paying < $1000 a year for a (now valued at) million dollar home.

Don't they reassess? 1% of a million is definitely >$1000

dimatkach said:UncaMikey said:
If you have a mortgage, P&I are fixed, but our property taxes used to go up 10% (max allowed by state law) every year, much less than the rent increases we've seen.


Well ... yeah ... But, not sure about rates and prices in your area, but where I live, the taxes I pay for a year would hardly cover a month's rent of a comparable residence ...
Yes, they keep going up, and yes, the grow faster than rent in %, but the absolute dollar values just don't compare.

In Texas, and probably other states, you can lock your properity taxes from increases when you are over 65.

dimatkach said:But, not sure about rates and prices in your area, but where I live, the taxes I pay for a year would hardly cover a month's rent of a comparable residence ...
Yes, they keep going up, and yes, the grow faster than rent in %, but the absolute dollar values just don't compare.

We lived in Austin. We were paying over $7K/yr in prop taxes, and it was going up 10%/yr. This was for a 2K sf home built in the early 1970s in a nice neighborhood close to downtown, but nothing grandiose. I suspect the folks who bought our house will be paying $10K or more per yr in prop taxes.

I've been in a rent controlled 1200sf apartment since 2002. in that same period of time I have bought/build and sold several pieces of real property. can't beat the $1,200 rent AND I'm in a great location in the city and have the best unit in a very nice building.

I don't see myself buying a house in the next few years.... maybe in a couple of years when the market finishes its down cycle I'll buy a teardown and build a house but until then I'll stick with my $15k annual rental expense and take my $100 renter's credit too. and it helps that I never have to pay for any repairs and only maintain renter's insurance.

the true benefit is participation in appreciation of equity.. but that is not a reality from 2006 to about 2010