To Learn about tax advantagess Studies
The tax deduction Explained
Mark and Jen purchased a home for $400,000, with $8,000 in annual property tax. They put 20% down and have a monthly payment of $2,689.00. Of this monthly payment, approximately $2,366 is interest and real estate taxes, which can be partially tax deductible.
Mark and Jenn make a combined income of $100,000. Their employers withhold taxes based on their salary of $100,000. When tax time comes, they can claim the mortgage interest and real-estate taxes paid, which will be approximately $10,000, effectively reducing their gross income to $90,000. When they compare the taxes withheld on their gross of $100,000 to their adjusted gross
– “they overpaid their taxes” by approx $2,500. Mark and Jenn get a $2,500 refund just for owning a home!
Let Uncle Sam Help!
Buy more with the tax deduction
Tom and Donna
Tom and Donna could only afford to pay $2500 month. However they could not find a home in this price range. They needed at least $25,00 to $30,000 more to buy something really nice. We utilized the tax deduction to help them buy more of a house.
Here is how: Instead of “waiting” until tax time to get their refund, Tom and Donna did the following. Since we knew they would easily get a refund of $2500 – they went to their employer and requested to increase “dependents” to allow them to take home $210 more per month. Using this $210 we determined that approximately $50 would go towards the additional real estate taxes and $160 for additional mortgage payment. This $210 allowed Tom and Donna to increase their purchase power by $33,000!**.
The Seller Can help you buy a home!
Kristen wanted to buy a condo, she had $10,700 total. For a down payment and closing costs. Not enough to cover both items.
We found a condo listed for $300,000 Kristen was approved for an FHA loan with a 3.5% down payment, using her $10,700, this covered the 3.5% of the asking price needed. Now we needed the $6,000 for closing costs and prepaid items, we negotiated the asking price of the condo $306,000 with the seller to “contribute” $6,000 for the buyers closing costs, In this case the seller would be effectively netting $300,000 before closing costs.
Kristen paid $306,000 for the condo, she put $10,700 down making her mortgage amount $295,300. At the closing the seller gave Kristen a credit for $6,000 which covered the closing costs. Kristen has her condo she is happy and the seller is happy, a win win for all...
Mary was renting a condo for $1400 per month; she basically was throwing $16,800 out of the window.
She wanted to buy a condo she wanted to pay not much more than rent, she thought waiting a year to save more money was the way to go. When we asked the question “how much can you save” her reply was minimal and not enough to make a dent. We structured a deal for Mary where she
Prequalified for first time buyer program or FHA program. 5% down
Purchase a condo for 200K
3% down payment = 6000 plus $5000 closing costs
Total monthly payment = approx $1700 (including mortgage, taxes, maintenance fee)
Using the tax deduction of $10,000, Mary was able to get a refund of approximately $2,500 per year. Spread this $2,500 over 12 months = $210 per month.
Mary’s effective monthly payment is $1,490- so for $90 more per month, Mary owns her own home.
The Rebalancing Act!
Joanne and TedJoanne and Ted needed to upgrade their home, their 3-bedroom, 1-bath was just too small for their growing family. They “had” to sell their home for $269,000 and they wanted to buy a 4-bedroom 2.5 baths for approximately $470,000. They became stuck on the number of “Had To Get” $269,000. After many months, several other realtors and rejections, we proposed a plan to reduce the price by $40,000. Their house sold and the homes that they liked previously for $470,000, we were now in a position to negotiate. We zeroed in on a home suitable and negotiated a sale for $430,000 which was $40,000 below the asking price of what they thought they had to pay. So by reducing their home we made this up on the “buying" end.
**Always consult with your tax advisor regarding your individual tax circumstances.
