In the DC/VA/MD area a 1-2 bed condo or townhouse in the neighborhoods we’re interested in typically go for an average of $4k a month in rent, or $800k-$1.3M to buy comparable (so monthly cost of $7k-$10k for mortgage + other expenses to owning). That’s the cost for places that aren’t even that nice, which is wild. Assuming we’re spending $48k annually on rent today, if we bought a house we’d be looking at $84k to $120k a year to housing costs — ****my question is: would the home owning tax deductions and ROI really claw back that $36k to $72k a year delta on housing costs — not to mention the $200k up front cost?**** Am I really throwing money away by renting? Would I be better off putting that delta into a VOO or similar ETF? Any recommendations on how we should go about calculating and considering that? —— More info on us if it helps with your answer: we are a couple in our mid-30s who are moving to the DC area this month and plan to start a family within the next year. We both work in tech with total household taxable income of around $450k. Currently we have no eligibility for any meaningful tax breaks at our income level without kids/house and feel like we’re getting slaughtered by the man (currently in 32% tax rate, and 23% effective tax rate). It’s important to us to live in a walkable place so the neighborhoods we’re considering living in the DC area right now are on the more expensive end for the amount of space you get — in 5 years or so when we have 2 kids we’d be more open to moving deeper in the burbs (where houses tend to be just as expensive but you get a bigger bang for your buck as far as square footage). Right now we miss SF and the city life too much to jump straight into the burbs. Today (pre-kids) most of our paychecks are going to 401k, ESPPs, rent and basic expenses, and when we splurge it’s really only on travel and even then we’re super frugal and always look for deals or stay in more casual hotels etc. With that frugal mentality it’s been REALLY hard for me to even consider doubling our housing costs for the same (or in some cases even less) space! Plus soon we’ll be adding really expensive childcare and child costs based on the high COL of the DC area. Ugh I need advice — to buy or not to buy? #investments #homeowner #roi #taxes #stocks #realestate
As a homeowner, I have never believed that the tax benefits of homeownership are worth it. Before owning the house, I could write off $12K with standard deduction. Now with a house, I can write off close to $20K. That’s $7K less taxable income, or like $2K less in taxes. Meanwhile, I’m paying $15K/year in interest (money down the drain). Not worth it!
To put it more succinctly: it rarely makes sense to TAKE ON MORE expenses in order to get a partial tax cut.
And many forget or unaware that there is a 750K limit on house for tax deduction, which means if you buy a house for 1.5M, you can only deduct half the interest you paid
Only consider VA and exclude MD and DC, as the income taxes and sales taxes are higher. Then, rent for a year is northern VA until you learn traffic patterns that work for your job. Then, buy.
I live in Leesburg (Loudoun County, VA) which has commuter buses into DC and is close to the end of the Silver metro line. You can buy a small home for $550-$650K in family friendly neighborhoods. We are getting ready to sell our 2200 sqft home in that price range as we are making a retirement move. You are better off living in Virginia as Maryland has a county income tax. When we moved to the area 10 years ago we rented in Montgomery Co, which has a 3.2% income tax on top of the MD state income tax. DC has Maryland-level income and sales taxes (and it is not safe there, even in NW and Georgetown). As another poster suggested, you may wish to rent for a year. If we had bought in Maryland instead of renting we would have been stuck there for a while.
Lol op are you me? Similar household tc without stock and in dmv area too looking to buy. I’ve been considering whether or not to buy in this market.
Lmao sigh! What areas are you looking at? Have you completely ruled out DC?
Yea I’ve ruled out dc. I’m looking in Fairfax mostly - oakton,Vienna, great falls, McLean(might be too expensive ), Fairfax station, Maybe’s are chantilly, Centreville and aldie (Loudoun)