If you’re looking to buy, think twice about your taxes this year.
Today I have another critically important tip for buyers: How do you prepare to buy a home around tax time?
Most of the time, people who own their own business or file with a 1099 will do as many write-offs as possible, but that can cause a problem. Over 95% of residential real estate loans are backed by the federal government, so the loan criteria typically look at your adjusted gross income, which is your gross income less your deductions.
If you don’t take the deductions, you will have a higher gross income, but you will have to pay higher taxes. If you’re planning to buy a home, you need to look at if it’s worth it to make these deductions.
For example, if you have FHA financing, the lender will typically approve you for five times your adjusted gross income. If you made $100,000 but had $50,000 in deductions, you will only be approved for a $250,000 home. If you made no deductions, you would be approved for a $500,000 home.
It is critically important to speak with your accountant and real estate professional. They can make sure you are taking the correct deductions and maximizing your ability to purchase the home you want. If you have any further questions, I’m here for you. Just call or email me.