Venus, the reporting of a real estate transaction to the IRS under the Patriot Act/40 state tax enforcement consortium will be done by the state office responsible for property deed registrations, not by the seller, bank or agent. It happens regardless of whether the home is sold for cash, via a standard mortgage loan, or with a 'no doc' loan. The state agency report will include the name and address of the new deed holder (buyer), the sale price/assessed value of the property, and the name of any leinholders i.e. bank/finance company. Based on this state agency report, the IRS will most likely automatically request more financial info from the buyer's bank/finance company if they appear as leinholders. As I understand it, the same basic reporting procedure is followed as with state motor vehicle agencies generating similar reports to the IRS based on issuance of new motor vehicle titles.
I agree that the decision to buy or rent must be based on individual factors such as ...
Are you willing to live in the same area for say the next 5 years minimum ? (if not, transaction/agent/closing costs can be significant compared to any appreciation in value)
Is your federal + state income tax bracket sufficiently high that home mortgage interest and property tax deductions will significantly reduce the amount of money you must pay out in income tax ? (if not, your effective cost of home ownership loses it's advantage versus renting).
Are you prepared to cough up say $5,000 at any given moment to deal with a serious home repair issue ? (if not, a roof problem or septic problem or water problem could force you to take on a 2nd mortgage and destabilize your financial situation).
Is the area that you're thinking of buying a house in growing in population, a desireable place for Joe Sixpack to live and work etc. (if not, there is a good chance that future buyers will be scarce and the value of all properties in the area may fall, leaving you with a mortgage for an amount greater than your house can be sold for on the market).
And of course the original point - do you have enough reported taxable income in previous years to justify having enough money saved to make a down payment on a house plus make monthly mortgage payments in the future ? (if not, an IRS audit may soon follow)
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