Consider Your Federal Income Taxes When Buying a Home

Can you believe that buying a home is a big financial decision? Can you guess why? Did you know that the purchase of a home can affect your federal income taxes? How you ask? Let’s examine.

In recent years, many mortgage brokers have convinced buyers to commit to large loans with large interest rates. The mortgage brokers, however, did not discuss the financial burden and/or the federal income tax consequences.

Misconception about Mortgages

Some buyers came to the mortgage broker asking for or under the misconception that having a higher mortgage interest rate would give them higher write offs on their federal income taxes. However, many of those same buyers discovered at tax time that due to alternative minimum taxes the write offs were not what they expect and they did not reduce their federal income taxes at all.

Still yet, others did not consider that the pre-approval they received did not account for their utilities, grocery bill, clothing, entertainment, etc. as a result the purchase of their new home became financially overwhelming very quickly. The reason for this is the pre-qualification only evaluates bills and credit that is reported to the credit bureau. It does not reflect all of the expenses necessary to operate a home like the utilities, grocery bill, entertainment, etc.

Consider an Accountant Before Buying Your Home

If you are concerning purchasing a house contact your financial adviser or accountant, then the mortgage broker, then the Realtor to avoid most of the financial mistakes that are plaguing the market right now. If you already own your home consider contacting a financial adviser or accountant before refinancing your home, as well.

By: Serena Brown