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Tax savings with purchasing a house

Hi,

We finally put an offer for a house. With regards to tax savings, when do you see this savings? Is it seen on your paycheck? Or is it seen on each annual tax refund?

I've ran my numbers using various tax calculators, but they don't quite tell me the "how" part. I tried checking out the form for tax withholding at work, and I don't see any instructions for factoring in real estate insurance and private mortgage insurance.

Just for reference, these are my numbers:

real estate taxes - $3000 per year private mortgage insurance (pmi) - $124 per month

*Note: Regarding PMI, I read that if a loan is made between 2007-2010, then any PMI payments from that period can be tax deductible. Is it true?

Thanks!

========================================= MODERATOR'S COMMENT:

- what's the loan amount and interest rate?

Reply to
Sallymae
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Reducing the amount withheld is accomlished by increasing the number of allowances reported on form W-4 given to your employer. You will have to locate software that calculates the magic (allowance) number for you or do some number crunching. BTW you should also factor in the actual interest paid on your home mortgage also.

Reply to
Haskel LaPort

Purchasing a house as a personal residence should lower your tax liability. There are many factors in play here. What I do for clients is to prepare a tax projection to determine the tax liability with the new house purchase. Then, I tell the client how much to adjust their withholding from their paychecks after reviewing the ytd paystubs.

Nothing automatically happens to your paycheck. You have to tell your employer how much to deduct. This is done via form W4. Depending on the state you reside in, you may want to adjust the state withholding too.

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Reply to
Benjamin Yazersky CPA

That's up to you.

The W4 instructions have something about "How much will your itemized deductions be? Subtract your allowance if not itemizing, divide the difference by a magic number ($3000?) and add that many exemptions to the W4 number". Then your employer will withhold less from each check.

Whether or not you do that, when you file your income tax return, the amount of tax will be lowered due to the increase in deductions.

Seth

Reply to
Seth

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