if you buy a house......?

Question

I just got a really good job and was wondering if I bought a house instead of renting will the property tax lower the income tax on my check? I never actually thought about this till now. I have no dependents and am tired of getting ripped by the govt. I lose like 30% off my paycheck on taxes alone so basically will buying a house lower the percentage they take from me each pay check? I want to learn how to avoid getting taxed so high. Note that kids right now is not an option for me or my girlfriend. Also any other advice to help get a higher tax return or lower the income tax is welcomed. Thanks in advance.

Answer 1

If you are in a solid position to buy a home absolutely do. At tax time you will be able to deduct any interest you paid on your mortgage during the year. This will slightly lower the amount of income tax you pay, but should definitely not be a predicating factor in home buying. Always pay yourself first by saving money for your future. The main advantage of owning over renting is that the equity you gain in your home over time will help provide financial security. I doubt you know anyone who is renting that you would think of as wealthy. It is never too early to think about retirement. Most empty nesting retirees also downsize, and the equity in their home can bolster their retirement savings. Buy a house you can afford. Up-size if life allows. Laugh all the way to the bank when you retire.

Answer 2

Income taxes from the Fed (and state) are completely unrelated to the property taxes your city and county assess on any home you own.

The only way to offset what you pay in income taxes, as has already been stated in answers above mine, is if you can have enough deductions to itemize. You really won't even know if that will be the case until the first time you file after the purchase - or even the second time, depending on how late in the year you close on a home.

It is usually the amount of the mortgage interest that helps knock you up to being able to itemize, but without dependents and their related expenses, it will just depend on a lot of things - like where you live, how much the taxes are there, how much house you buy, the interest rate on the mortgage, etc.

But again, the two are not really related, and it will not affect what comes out of your check. To change that, you have to change your exemptions, and I wouldn't do that if I were you. Being single with no dependents, it might make you have to pay upon filing taxes each year.

Answer 3

Buying a house will not by itself reduce the withholdings from your paycheck. You need to do something in addition to that to make sure it happens. Your employer provided you a Form W-4 where you listed the withholding allowances to which you are entitled. You have the right at any time to change those allowances by completing a new Form W-4. So after you buy a house, and can anticipate a certain dollar amount of mortgage interest and property taxes as itemized deductions (make sure they exceed your standard deduction), then complete a new Form W-4 with your employer, using the worksheet on the form to estimate your additional withholding allowances. Compare the new result with what you had already selected, and if you end up with more withholding allowances, turn the new form in to your employer. As soon as it becomes effective, your net pay should increase.

Having income tax withheld is what is known as "paying as you go." The withholding doesn't determine your final tax liability for a year. That determination is made when you complete your income tax return after year-end. But you should be able to estimate, using tax tables or rate schedules and a decent estimate of your taxable income, what your final liability will be. Try to gauge your withholding so you just about break even at year-end.

Answer 4

Mortgage interest and real estate taxes, if they are high enough, might enable you to itemize and therefore reduce your taxes. The savings would at most be the total of your itemized deduction minus whatever standard deduction you're otherwise entitled to, times your tax bracket, for federal taxes.

Any state tax savings depends on the state you are in - in some states, it would be zero, in other states, you'd save something. If you pay local income taxes, they probably wouldn't be affected, but again, that depends on where you live.

Social security and medicare taxes will not be affected.

If you're itemizing you might be able to claim more allowances on your W-4, so you'd get more in each paycheck. But what you should be looking at is the tax amount on your tax return, not what comes out of each check.

Answer 5

Buying a house will not lower the amount of taxes that is removed from your paychecks. It will decrease the total amount of taxes you pay each year. The best thing to do is talk to an accountant or financial planner who can tell you exactly how much of a tax break you can expect.