After an analysis of the economy I have decided to build a new home and have biased my decision on several economic principles; cost, rational thinking, incentives and others. We live in uncertain economic times and making a decision of this magnitude must be scrutinized and made with caution. I did not make my decision until I had taken a hard look at all of the issues at play.
There is a principle of economics that states rational people think at the margin. The definition reads as follows; rational people systematically and purposefully do the best they can to achieve their objectives, given the opportunities they have. This is the basis of my entire decision making in regards to the decision to build a new home. The whole idea of building a new home started however biased on the taxes that I currently have to pay and the tax incentives that I currently do not receive. I currently own two homes. One of them is a home that I rent out for a profit. One government bodies that affected my decision is the taxing body or the IRS. When doing my taxes this year I noticed that I was loosing $4,000 in child tax incentives because I had a supplemental income from the rent house. Once I added in the property tax, school tax, insurance, and the $4,000 per year lost it was an even split. The house generated $7,000 a year and cost me in tax deduction losses along with the other standard items $7,000 a year. Any one can see that this is not good business. A rent house is hard to keep up with and if I am not making any money it is not worth the trouble. This is a good form of supplemental income under my circumstances if I own several homes. Coupled with the fact that I do not have the money to purchase another rental property, I decided to put the rental up for sale. Now that I am selling the home I had to take into consideration what I was going to do with the money and do to tax incentives to reinvest in real-estate I ultimately... [continues]
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