In my last article, I provided the details that we’ve received about the Stimulus Bill’s 1st Time Home Buyer’s Tax Credit. At the conclusion, I mentioned that potential users of this credit should check with their accountant or CPA regarding how it can apply to them.
In speaking with some young couples since, we also discussed further potential advantages for them. So add these questions to the list you discuss with your accountant …
- Will I be able to adjust my paycheck withholding amount to reduce the refund I receive next year in order to have that money to spend during 2009 … and NOT give the IRS use of that money interest-free?
- How much will my Schedule A deductions be for closing costs, property taxes, and mortgage interest?
- If I qualify for a refund on my 2009 taxes, what will my added benefit be if I use that money to add to my IRA account?
- Regarding the mortgage interest deduction, how much better off am I to buy “sooner rather than later” in order to have more months of mortgage interest deduction?
Depending on your unique financial situation, you may find that your net discretionary income might actually increase when you buy a home versus renting and getting no deductions for the rent payment. Plus, you’ll be building equity in your own property rather than your landlord’s.
When I purchased my first home 22 years ago, and had a “regular paycheck”, I found that after adjusting my withholding to allow for the extra homeowner tax deductions, I actually had more “pocket money” than I did as a renter. But my strategy was to minimize the amount I received as an IRS refund because I didn’t like giving them use of “my” money interest-free. Your strategy might be different.
Again, be sure to discuss this with your accountant, because you want to make a GOOD decision when considering if this is the right time for you to buy your first home.
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