Cooperative Home Ownership Financial Advantages
For those open to buying a senior cooperative home they often ask: “Why would I take some of the equity from the sale of my home and purchase a coop home share?” It is a valid question and deserves a response.
Lower Your Iowa State Income Tax
Iowa permits you to itemize certain deductible items on your income tax return to reduce your state income tax. The entire amount paid for property taxes and interest on mortgages can be itemized. Coop home shareholders receive a 1098 each year listing the eligible amounts that are deductible. Combining your property taxes and mortgage interest with your federal tax payment, charitable contributions, and medical expenses can greatly reduce the amount owed for Iowa state income tax.
The Iowa 2020 standard deduction for a single filer was $2110 and if married, filing separately $2110 for each person. The sum of the deductible amounts in year 2020 for property taxes and mortgage interest ranged from $10,485 to $13,490 depending on the square footage of a Vintage Cooperative of Ankeny coop home. A share owner of an 1106 square feet Oak unit could minimally reduce their Iowa income burden by $400. In one specific case the owner of a 1373 square feet Locust unit found they saved $870 by itemizing deductions.
Lower Your Federal Income Tax
There is a possibility that you could itemize deductions that exceed the federal standard deduction amounts. In 2020 the standard deduction of a single filer over age 65 was $14,050 and $27,400 for a married couple over age 65. Your portion of the cooperative’s property tax and mortgage interest can be used in conjunction with charitable contributions, medical expenses, state and local taxes, and other permitable deductions to reduce your federal income tax.
Credit for Military Service and Disability
Members of the cooperative that qualify for a military exemption to reduce their property tax assessment receive a payment for the actual property tax reduction. In the case of a member who is a disabled military veteran or is the spouse of the member the entire amount of prorated property tax is returned by the cooperative. Typically, the military exemption amount is $72 and the amount for a qualified disabled veteran could reach $4300 depending on the square footage of the unit and percent of military disability.
Increase Your Income
Use the balance of your funds from the sale of your home to increase your income. The current real estate market has a large demand for existing homes resulting in higher sale prices. You can put that balance above the price of a coop home share to work to increase your income.
Equity Growth
Your coop home share can increase in value. There is no guarantee that the value will increase but history has shown that real estate tends to grow in value over time.
Doing the Math
In examining the financial advantages, you find there is a beneficial impact on the monthly fee for a coop home. One can easily understand that the monthly fee minus the possible income tax savings lowers the monthly fee. The ability to increase income from investing a portion of your profits from the sale of your home makes the monthly fee more affordable. For military veterans and their spouses, they still retain their property tax exemptions thereby lowering the monthly fee.
10/17/2021 L Paustian