Tax Trick |
If you’ve bought a home recently or are thinking about it,
you need to know about a Tax Trick that may help
pay your mortgage payment.
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The trick: change your income with-holding.
How do you do it? You file a new W-4 form with your employer,
adding extra exemptions. By doing that you’ll increase
your take-home pay.
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If you don’t change your withholding, you’ll be lending money
to the federal government all year. Uncle Sam will give you
a refund but, Sam doesn’t pay interest.
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Who’d put money in a bank that doesn’t pay interest?
“You have tax savings when you buy a home” says Carolyn Gibson, senior
tax consultant with Wagner Noble & Co. in Charlotte.
“Use that savings immediately to
"make up the difference between rent and mortgage”
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Mr. and Mr. Buyer have just bought their first home, costing $117,000. Their 30-year
mortgage will have monthly payments of $905, and about 95% of those payments
will be tax-deductible interest. Depending on their tax bracket, the Buyers’
yearly tax savings would range from about $1,500. to $2,700.
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By increasing their W-4 exemptions, the Buyers’ could increase their take-home
pay to help pay the mortgage. For example, if they determined their tax
savings would be $2,700, they could safely increase their take-home pay by $50 a week. In this example, if you have a new mortgage payment of $905, your
increased take home pay ($50 x 4 weeks) will help you by providing
$200 to make this payment ($905 minus $200 = $705).
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The W-4 includes a worksheet that will help you determine the number of exemptions you can take or you might consider asking an
accountant about how this Tax Trick
can benefit you and how many exemptions you should take. |
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