NWR: taxes and owning a home

jaimelody

For those who purchased their home and filed taxes for 2008 - how much did your refund go up because of the interest paid towards your home? FI seems to think we're going to get 3k each easily. But I'm not so sure. I'm not looking for an exact figure, an estimate in your experience?

ffbride_0813

I want to say it went up by about $2500.  We filed seperately and put the money in a shared account and thats about all there is in it.  We may have skimmed a little off the top before we made the deposit.  We bought our house in June of last year so it was approximatly 6 months.

ffbride_0813

I was thinking about this though.  I pay a lot more into taxes than I probably should.  I should change my withholding so I have always gotten an obnoxious amount back.  But FI and I calculated without the house and with because we had turbo tax and we are nerds like that and it was $2500.  So in the end it depends on a ton of factors.  Also i dont know how much you are paying in your house payments compared to me and what kind of income you have compared to me.

30may09bride

It totally depends upon how much you are paying in taxes in each paycheck and how much your interest and propery taxes are.  Ever since I bought my house, I have less money taken in taxes out of each paycheck to avoid getting too much money tax time.

erikag23

we bought our home 3 years ago in january.  2008 was the first time we filed joint/married and we got a little over 5k back and we both claim 0.  depends on your salary, tax bracket, deductions, etc. 

mrs.spunky1508

Well it depends on how big your mortgage is. If the principal/interest portion is say $1k/month, you're now paying between $700 and $800 interest, x12 months = $8400-9600. Plus then you have property taxes, which are less for you since you're not in NJ. Ours are $9300/year. Both are deductions if you itemize, along with any state income taxes you pay, which reduces your tax liability. I'd say $3k EACH may be a stretch, but it could easily be $3k for both of you, IF you don't have a lot of capital gains or very high income. For example, without the first 1st time homebuyers credit, our refund would have been $2400, but we also had a large chunk in capital gains (about 1/3 our total income) b/c my H sold stocks & stuff for our DP on top of our regular wages. Try turbotax.com. Yes, you will have to use the 2008 version but it does give a decent projection. Note: I'm not a CPA.

USER876

If you just bought your house, take your mortgage amount and multiply by your interest rate.  This is the amount of interest you are paying and can deduct.  Now basically you are deducting your taxable income by that amount so you are saving the tax on that amount.  I don't know you salary or tax rate, but a good rule of thumb is about 30%.  So if you paid 10,000 in interest, you should save about 3000 dollars in tax liability.  This doesn't mean your refund will increase by that amount, it just means that your tax liability will decrease by that amount vs not owning the home.Property tax rule changed for 2009.....you can only deduct up to 5K of your taxes, which in NJ, doesn't go far since even a basic 3-4 bedroom house seems to have at least 7-10K taxes in most areas.Also, once your combined salary starts to reach the ~150K mark (according to the US gov, you are wealthy) the mortgage interest, property tax deductions start to reduce.

USER876

ps....also if this is the first yr you are married, beware of the "marriage penalty."  Depending on your salaries, you will most likely have more tax liability than when u were single status and filed separate.

mrs.spunky1508

Property tax rule changed for 2009.....you can only deduct up to 5K of your taxes, which in NJ, doesn't go far since even a basic 3-4 bedroom house seems to have at least 7-10K taxes in most areas. Only true if your income is over $150k.

mrs.spunky1508

Not cool to scare people like that, User! I had to go back and ask the boss/CPA if it was true, which it's not (entirely).

mrs.spunky1508

Oh and that's only for the state (NJ) refund. Jamie doesn't live in NJ. Federal is still the same - so far.

uppereastgirl

"Also, once your combined salary starts to reach the ~150K mark (according to the US gov, you are wealthy) the mortgage interest, property tax deductions start to reduce."Does anyone have info re: these phase-outs handy?  I can dig it up if no-one has it, but I'd be interested to see how it works.Thanks!

USER876

You are right, BUT.....I just checked, corzine's proposal was first to cut it out all together.....then to make it 5K, and it was changed just before it was passed due to public uproar.  Final is as you said.....150K income limit.Using the 3X rule of thumb, that's a 450K house for someone making 150K that loses that deduction.  450K isn't even that much in this state, most homeowners will loose out on the credit that probably can't afford to.

USER876

UpperEast......it's VERY confusing, and what I found after playing around with turbo tax AND speaking at length with my company controller who is a tax CPA is that it's not as cut and dry as the text you read says.  Best bet is to play around with turbo tax and see how your deductions are cut as you increase your salary.

mrs.spunky1508

I agree with USER on that. TurboTax changes things every year, as the new tax code is written, but usually not too too much. The prior year's version is a good guideline.

uppereastgirl

Okay, then I'll hold off and play around when we're actually looking to buy.  I'm kind of trying to figure out if there is even a tax advantage for us to buying period(particularly because we'd be buying in the city, which means that there would be maintenance fees and such that get thrown away).

jaimelody

Wow. Thanks for all the info everyone - Sorry, I posted and then we got a little busy here. 8300 in taxes in NJ! good god. We got our tax bill at the beginning of the month and it was 2500 and I thought that was a lot. You're right the property taxes and values are WAY different. We have a 3bdrm 3&1/2bath, granted we got it forclosed but still. Both of us had an increase in salary this year, but neither of us changed our declarations - both claim 1 (I think). So maybe 3k between the two of us, def. not each. Thank you!

alliecarrie41

...this is why i have an accountant, even thought DH and I are both finance people.  i'll never keep up with this_crap!

USER876

I don't view maint fee as "throw away" if you had a house would prob be paying more each month to maintain it (grounds, exterior,etc).