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Should I adjust withholding for new home

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thenewguy1
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Should I adjust withholding for new home  Reply with quote  

According to my loan officer- I would save approximately $350.00 in taxes monthly on a home with my mortgage rate/calculations he did. I think its sound- about $1800 for Principle,interest, taxes, PMI, etc.

That said, I would like to adjust my withholding so that I dont get a huge refund at the end of the year. My question is this- as principle starts to go up, and interest goes down, do I need to re-adjust my withholding each year to match that?

My buddy (who isnt a financial advisor) said that when buying a home you adjust withholdings and then leave it as is for the life of your loan. Is this true?

My fear is that I will withhold 300-400 dollars in taxes each month, It will be right at first but then three years down the road find out I owe a ton at the end of the tax season. Thanks.
Post Tue Jan 24, 2017 5:25 pm
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oldguy
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quote:
According to my loan officer- I would save approximately $350.00 in taxes monthly on a home with my mortgage rate/calculations he did


Your loan officer may be over-estimating. Say that you have a $300,000 loan @ 4%, your interest cost is $12,000/yr. But if you are a married couple, you get a standard deduction of $12,600/yr for free. So your mortgage deduction would be worth zero.

But if you have a bunch of deductions - say state income tax, property tax, charity - that add up to $9000, you add the $12,000 to $9000, ie, $21,000. So you would deduct $21,000 from your income way better than using the $12,600 standard deduction. And it doesn't change all that much over the first 10 or more years.

As for owing a ton at year-end - what's wrong with that? It doesn't affect your tax bill, the total is the same whether you over-withhold all year or under-withhold.
Personally I make sure that I never get a refund, I always want to owe on April 15.

I've read that the average refund is about $3000 - and that people are happier when it is even bigger?? My money stays in a taxable SP500 Index that has an average longterm return of 11%/yr - so I leave my money there all year and until April 15 of the next year.
Post Tue Jan 24, 2017 10:16 pm
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thenewguy1
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quote:
Originally posted by oldguy
quote:
According to my loan officer- I would save approximately $350.00 in taxes monthly on a home with my mortgage rate/calculations he did


Your loan officer may be over-estimating. Say that you have a $300,000 loan @ 4%, your interest cost is $12,000/yr. But if you are a married couple, you get a standard deduction of $12,600/yr for free. So your mortgage deduction would be worth zero.

But if you have a bunch of deductions - say state income tax, property tax, charity - that add up to $9000, you add the $12,000 to $9000, ie, $21,000. So you would deduct $21,000 from your income way better than using the $12,600 standard deduction. And it doesn't change all that much over the first 10 or more years.

As for owing a ton at year-end - what's wrong with that? It doesn't affect your tax bill, the total is the same whether you over-withhold all year or under-withhold.
Personally I make sure that I never get a refund, I always want to owe on April 15.

I've read that the average refund is about $3000 - and that people are happier when it is even bigger?? My money stays in a taxable SP500 Index that has an average longterm return of 11%/yr - so I leave my money there all year and until April 15 of the next year.


Thanks for that.. so it doesnt change much over the years?

I do itemize and recall getting a good 2-3k above the standard deduction last year.
Post Wed Jan 25, 2017 12:22 am
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