This is a bit off topic but we are in the process of purchasing a home and I have a question. I always hear about the tax benefits of owning a home. At tax time we rarely owe any money. We get all of our money back at tax time(we are claiming one less child than we have). Therefore, we don't owe the IRS any money at the end of the year. How will home ownership help us?? Will we still get the money back we paid in interest and property taxes?? Or will they only apply it to taxes that we owe??? I'm just trying to figure out if we will actually benefit from owning a home since we never owe taxes at the end of the year. Thanks in advance...
You get to take the interest you paid off the taxes you owe, it reduces your taxes. With this you have to itemize your taxes. It benefits some, but some still make out better with the standard deduction. It depends on what your standard is and how many dependants you have.
Actually you get to take the interest off of your income which reduces your taxes. It is not a $ for $ savings ie: you spend 1k on your home you get a 1k reduction in your taxes owed.
[] We get all of our money back at tax time. cfand3boyz ========================= Why give Uncle Sam an interest free loan when you could get 10% or more on that tax refund. Another thing about the mortgage interest tax deduction you can invest the tax savings on it so you gain 2 ways on that. LB 59
cf first, good luck on the home ownership front. Secondly, the tax benefit is in direct relationship with the tax bracket you are in. If you are in the 15% bracket, then your tax liablity will be reduced by 15%. If you have a refund coming (shame on you if you do BTW) then your refund will grow by that same 15% $ for $. As an example still using the same 15%, if you pay a combined $3000 in interest and taxes, then you can claim that same amount if you itemize your deductions. This can reduce your tax liability by $450 ($3000 X 15% = $450), however, you also have to look at your overall deductions. You may find that by itemizing your deductions, you lose deduction $s. If that is the case, then you don't really gain from the interest and taxes deduction. I hope that I haven't caused you to be confused. This is just a general rule of thumb response. To get answers that are tailored to you, then please check with your tax advisor. Also, what I meant earlier in the post about "shame on you" is that you should manage your tax withholding so that you get virtually no refund and maybe even owe a couple of hundred at tax filing time. It is never a smart idea to give the government an interest free loan and that is what overpaying on your taxes is, "An interest free loan". fla-tan
