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Can your home give you a raise?

Buying a Home? Give Yourself a Raise! The next stop in our Loan Mechanics: The Inner Workings of a Mortgage series is all about just that. 

Did you know you can likely take advantage of the tax benefits for homeowners without waiting for a refund?

Though paying rent for a home these days is often MORE than the cost of a mortgage payment, it’s still not unusual to trade up to a higher monthly total when you purchase your first or a larger home. Fortunately, owning a home can come with tax benefits from the deductibility of most mortgage interest and real estate taxes.

Before you take action, check with your tax preparer. You’ll want to be certain that itemizing is more beneficial in your case than claiming standard deductions. If so, you may want to adjust your payroll withholdings. Though this is not really the same as getting a “raise,” you will be bringing home more of your real income with each paycheck.

Here’s all you need to do. Sit down with your payroll clerk and make the appropriate changes on your “W4” form. As you can see in the image below, you can factor in your interest and real estate tax expenses. Your “withholding allowances” can be adjusted accordingly.

W4_Form_Screenshot_Wisconsin_Home_Financing

Sample W4 for Mortgage Planning and Home Buying

Raising your allowances means less tax is withheld from your pay. Having more cash from each check as soon as you start making your new house payments can help ease the transition to a higher monthly total.

Some would rather wait for a refund, while others prefer to maximize use of monies as they’re earned. Weigh your options with your tax professional, then make the choice that’s best for you.

If you have questions about your mortgage loan or if you would like help finding a tax professional, please ask as I’m happy to help!

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