3 Huge Tax Deductions New Home Buyers Can Use to Put More Money in Their Next Paycheck

The American Dream is to own your own home.  This is an exciting time for you if you are a first time home buyer.  Congratulations!  You may have decided to buy your new home for many reasons – new addition to the family, better neighborhood, or improvement in your quality of life.  Your new home may be sitting on hundreds if not thousands of dollars.  How?

mortgage-295211_1280Most homes purchased in the United States are financed with home mortgages that carry interest payments that can be deducted on your income tax return each and every year.  With your new home mortgage you have the key to unlock valuable tax deductions that will reduce the amount of your hard earned income that is taxed by the US Government and the State. Like the excitement and satisfaction you get when you turn the key in the front door of your new home, you can experience the same excitement and satisfaction knowing you are saving money every day on your income tax.

What many new home buyers do not know is that can take the tax savings from their new home and put more money into their paychecks NOW.  When I purchased my house, I saw HUGE tax savings and got a refund of over $10,000 the first year.  Then I figured out how I could UNLOCK that $10,000 a year in tax savings and put more moneyu into my take home pay each payday and not wait until the end of the year to get my refund.

Here’s 3 of the biggest tax deductions you can unlock.  Your new home may be sitting on hundreds if not thousands of dollars in tax savings that you could be putting put into your paychecks.

padlock-303617_1280    Home Mortgage Interest and Points

The Internal Revenue Code is often used to provide incentives for economic activity.  Providing taxpayers a tax deduction for mortgage interest and points paid has long been used as an incentive for sustaining or increasing activity in the home construction market.  Purchases of new homes or existing homes.  There were nearly 5 million home sales in 2014 with a median home value of $208,000.  That’s a lot of economic activity!

Interest paid by you (and/or your spouse) on a home loan for either your primary (principal) or secondary residence is deductible in the year paid as an Itemized Deduction.

1098 FormThis interest is commonly reported to you on either a Form(s) 1098 by your bank or lender and on a HUD1 form when the property is initially purchased or refinanced.

Points are prepaid interest often required by a lender to secure or as a condition of financing.  Points paid in the year of initial property acquisition are fully deductible; points paid when refinancing can only be deducted over a period of time equal to the mortgage period.  Points paid are commonly reported on the Form 1098 and the HUD1.

padlock-303616_1280    State and Local Taxes

Money Down the DrainThe Tax Code can be considered a pay-as-you-go system.  This means that income tax is due to the Federal and State (and local, in some cases) Government as income is earned throughout the year.  The Internal Revenue Code provides taxpayers protection from being taxed on the same income more than once.  Taxpayers are allowed to deduct the amount of State (and local) income tax that they pay during the year as an Itemized Deduction on their Federal income tax return.  If amounts deducted are refunded by the State or local government when their annual returns are filed, the refunded State tax may need to be reported as income on the following year’s Federal income tax filing.

Taxes that you pay during the calendar year for State (and local) incomes taxes may be through withholding from paychecks, estimated tax payments or to settle a balance due on a prior year state tax return can be claimed as an Itemized Deduction to reduce income subject to Federal income tax.

If no state income tax was paid during the calendar year, a deduction for sales taxes paid during the calendar year can be claimed instead.

State Income Taxes paid can usually be found on your Form W2 and on last year’s state income tax return.  Income taxes are required to be withheld in accordance with either a table or formula that factors gross pay for the work period, frequency that you get paid, the filing status you claim and number of exemptions you claim.

Income taxes withheld from each employee will certainly vary as the relevant factors vary significantly from taxpayer to taxpayer.   Employers withhold income taxes from their employees and deposit them with the State (or local) tax authority in each taxpayer’s account.


padlock-303615_1280   Real Estate Property Taxes

Home owners like yourself, as well as the owners of other private real estate in your community – shopping centers, apartment complexes, factories – are assessed real estate property taxes to provide funds necessary to support functions that benefit the community at large.

Property TaxTaxes are assessed on your new home, by local governments based on a formula levying a tax amount for public schools, local infrastructure and other approved common services.  Typically, real estate taxes are based on periodic valuations of real property by the local government and the amount of tax is approved by elected representatives each year. Real estate taxes support functions like police and fire protection for your home and your neighbors’, public schools, public utilities, street maintenance, and local government expenses.

Real estate taxes are assessed by the local government to be equal across the same classes of real estate.  Your new home, for example, will have the same rate assessed as similar homes in your community.  Factories will have the same rates assessed as other factories in the community, etc.

Real estate taxes are typically paid in arrears  – tax paid in the current period is for last year.  Real estate taxes are paid either annually or semi-annually and many homeowners have an amount added to the monthly mortgage payment to be set aside in an escrow account to accumulate to the amount of real estate taxes that will be due in the next period.

While your principal and interest payment should remain fixed, your monthly mortgage payment is often adjusted each year to account for changes in the cost of insurance or taxes being paid by the lender on your behalf out of escrow.

Real estate taxes paid can be identified either from a Form 1098 from your bank or from your local government property tax invoice/office.

home-209172_1280What most new home owners don’t know is that you can unlock those savings TODAY – without waiting to file your income tax return next spring.  You can put the dollars your new home saves you in tax deductions into your paychecks NOW without waiting for your tax refund next spring.  The IRS collected $274 Billion from over 101 Million taxpayers last year and refunded that money only after people filed their income tax returns.  If you wait until you file your tax return to unlock the tax deductions your new home qualifies you is like giving the IRS a loan – at ZERO per cent interest.

Jeff Randall shares in his eBook Give Yourself a Raise : 7 Tax Deductions Every New Home Owner Can Unlock to Put More $$$ in Each Paycheck how you can use your new home to lower your income tax this year AND how you can take those savings now and put more money into your next take home paycheck.

Jeff Randall coaches individuals, couples and entrepreneurs on money management based on Biblical principles, and personal and business tax strategies. He is an Enrolled Agent licensed to practice before the Internal Revenue Service.  He provides representation services to individuals, couplJeff Randall background transp w logoses and businesses to resolve back tax issues.  His Refund Planning and Prescription (RP Rx) process helps hundreds of clients across the US and in 16 countries put the most money into each paycheck and not owe tax at the end of the year when they file their income tax returns.

Jeff is founder and Principal Advisor of Tax Break  He is the author of numerous tax and entrepreneur advisory resources and host The Tax Break Radio Show. Click Let’s Talk to send questions or feedback..

Your Tithe; Honor God and Reduce Your Taxes?


With Good Friday and Easter so close to the April 15 deadline for US income tax filing, let’s take a look at the relationship between your tithe and your income taxes.

 Malachi 3:10 states “Bring the full tithe into the storehouse, that there may be food in my house. And thereby put me to the test, says the Lord of hosts, if I will not open the windows of heaven for you and pour down for you a blessing until there is no more need.”  The Lord directs each of us to tithe, or give the first tenth of our income to His church.  Often we hear of legal debates surrounding separation of Church and State. The Internal Revenue Code recognizes churches as qualified organizations and allows tax deductions for donations to churches.

I’ve heard from many taxpayers over the years about their donations to the Church.  Many times, I hear, “I put X amount in the collection plate every week“.  My first piece of advice on tithing is this – you don’t tithe by putting cash in the collection plate.  In order for a donation to be tax deductible, any donation to a charitable organization that exceeds $250 needs to be acknowledged by that charity.  You need documentation on the charity’s letterhead acknowledging the amount of your  donation. From the Internal Revenue Code perspective your tithe is a donation.  From God’s perspective, we are instructed to give a tenth of our income as a tithe.  In order to receive the proper acknowledgment of your donation from the church you should make your tithe by check to the church or through the church’s e-giving. If you’re dropping some bills in the collection plate when it passes, I’d venture your donating to the church, you’re not truly tithing. And you may not receive the necessary acknowledgement from the church to deduct your giving on your taxes.

Now let’s look at a tax strategy around tithing.

In the Washington DC metropolitan area the median income is $90,000.  For example, Denise makes $90,000 as an employee.  Denise rents an apartment and typically claims the standard deduction on her tax return.  She doesn’t have any major medical expenses, and donates on average of $20 a week in the collection plate and another $500 during the year to various church sponsored charitable activities.  Denise has her state withholding taken out of each paycheck which comes to $4,950 for the year.  This year, Denise can either claim a standard deduction of $6,200 or itemize her deductions.

Denise $20

Denise has itemized deductions.  She has the state withholding of $4950.  Her donations in the collection plate added up to $1040 for the year; if the church has provided her a statement on their letterhead acknowledging those donations, she can claim them as a tax deduction. Same with the additional $500 she made to various church sponsored charities.  Denise has a total of $6,290 in deductions she could claim as itemized deductions.  Now Denise can itemize because the total itemized deductions is greater than her standard deduction for the year.  In Denise’s case however, the difference is only $90.

For most states, when the state tax is calculated, claiming the standard deduction will result in lower combined income tax.  Most states will reduce itemized deductions by the amount of state income tax claimed as a Federal itemized deduction.  In Denise’s case, if she itemized on the Federal she would end up saving only a few dollars on the Federal return and it would cost her significant dollars in higher state income tax when she completed the state tax return.  So, Denise really has no tax benefit from the $1,040 and $500 in donations she has made to the church this past year.  The amount of Federal income tax Denise paid this year totals $15,825. Here is another example.

Denise Tithe Denise committed herself last year to putting God first in her life and began tithing the first of the year. Denise’s tithe totaled $9000 last year and she received a statement at the end of the year from her church acknowledging her giving. She still had her state withhold
ing taken out of each paycheck and that came to $4,950 for the year. She now has a charitable donation of $9000.  She has a total of $13,950 in itemized deductions, greatly exceeding the $6,200 standard deduction.  Her Federal income tax bill is now $13,888.  Denise has saved $1,937 on her Federal taxes and another $345 on her state income tax.  By putting God first and following His instructions to tithe, Denise unlocked tax savings as well.

 I know what you are thinking……Denise donated $7500 more than before and is only saving about $2000.  She’s still out over $5000.  Remember, 1 Timothy 6:10 says “For the love of money is a root of all kinds of evils. It is through this craving that some have wandered away from the faith and pierced themselves with many pangs.” I offer up that it’s not about the money.  We are all stewards of all God provides us, and he instructs us to give freely the first tenth.  Matthew 6:33 “But seek first the kingdom of God and his righteousness, and all these things will be added to you.”  I’m merely highlighting that tax benefits will be added to you when you tithe.


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