Many home buyers take a look at their proposed total homeowner payment responsibilities (mortgage, property taxes, insurance and Mortgage Insurance, if applicable), and think, “There’s no way I can make that payment; I barely have enough take-home pay from my paychecks to cover that in a month.” Here’s a tip:
If you are single or married, you probably claim 1 on your W4 and your taxes are deducted from your paycheck accordingly. Since you get additional tax deductions as a homeowner that you don’t receive as a renter, you will pay less in overall taxes to the IRS. What you can do is increase what you claim, which will give you a greater take-home pay that will help you make those monthly payments. The idea is that your new tax deductions will offset what you don’t pay via automatic paycheck deductions.
If you want to play around with how your exemptions affect your take-home pay, a great resource is the IRS withholding calculator:
http://www.irs.gov/individuals/article/0,,id=96196,00.html
I am not a tax adviser and cannot guarantee this information, but it is meant to give you something to think about. I highly recommend speaking to your CPA or Enrolled Agent about your specific situation to see how tax deductions will apply directly to you. Your tax adviser should also be able to do a projection if you’re looking for something more accurate.
