This document compares the tax savings and out-of-pocket costs of renting versus buying a home for first-time buyers over a 5-year period. It shows that first-time buyers would save $11,440 in taxes and $14,700 in out-of-pocket costs, for a total 5-year savings of $26,140 by purchasing rather than renting. The key deductions for homeowners are mortgage interest and property tax deductions, which lower taxable income and tax liability each year compared to renters who do not receive these deductions.

1. To Rent or Buy in 2009

2. Renting Versus Buying in 2009
5 Year Tax Savings Outlook
First-Time Buyers Re nte rs
Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 - Year 5
Household Income $48,900 $48,900 $48,900 $48,900 $48,900 $48,900
Standard IRS Deduction
Married Filing Jointly n/a n/a n/a n/a n/a $10,900
Mortgage Interest Deduction $13,364 $13,195 $13,015 $12,825 $12,622 n/a
Property T ax Deduction $2,480 $2,480 $2,480 $2,480 $2,480 n/a
T otal Deduction $15,844 $15,675 $15,495 $15,305 $15,102 $10,900
Total Taxable Income $33,056 $33,225 $33,405 $33,595 $33,798 $38,000
T otal T axes Owed ($4,958) ($4,984) ($5,011) ($5,039) ($5,070) ($5,700)
Homebuyer T ax Credit $8,000 n/a n/a n/a n/a n/a
Annual T ax Liability $3,042 ($4,984) ($5,011) ($5,039) ($5,070) ($5,700)
x 5 Years 5
5 Ye ar Total Tax Liability ($17,062) ($28,500)
First-time Buyer Purchasing in 2009 5-Year Tax Savings:
$11,440
SOURCE: C.A.R.

3. Renting Versus Buying in 2009
Out-of-Pocket Cost Analysis
Renting a
Buying a Home - 3Bdr/2Ba
First-time Buyers Apartment
Mortgage Payment/Rent $1,340 $1,855
Taxes & Insurance/Renter's Insurance $290 $20
PITI/Total Rental Costs $1,630 $1,875
Monthly Savings $245
Annual Savings $2,940
5-Year Savings $14,700
Assumes all pmts/costs remain constant
SOURCE: C.A.R.