First return after buying house- How much did you get back ?

Anonymous
What determines how much you get back?
Anonymous
The market when you bought and the market when you sell. And whatever you did in between.
Anonymous
Get back on the tax return, not on the house
Anonymous
I think OP is talking taxes..... How much refund after buying a house.... depends on when, how much interest you paid that year and how much in property taxes....
Anonymous
It will be the difference between what you paid in taxes and what you owe.
Anonymous
Tax refunds are essentially interest free loans you make to the government, so they're not something you should look at as a good thing.

The ideal tax bottom line IMO and my accountant's, is to owe about $500 or less so you won't have to do estimated payments next year, but you also haven't been giving the govt. the use of your money for free (at no interest).

If you get a big refund adjust your withholding so that you will not overpay so much next year via withholding.

Tax refunds aren't "gifts" or manna from heaven, they're your money coming back to you after not growing for as long as the govt. has held it.

Anonymous
Anonymous wrote:Tax refunds are essentially interest free loans you make to the government, so they're not something you should look at as a good thing.

The ideal tax bottom line IMO and my accountant's, is to owe about $500 or less so you won't have to do estimated payments next year, but you also haven't been giving the govt. the use of your money for free (at no interest).

If you get a big refund adjust your withholding so that you will not overpay so much next year via withholding.

Tax refunds aren't "gifts" or manna from heaven, they're your money coming back to you after not growing for as long as the govt. has held it.



Maybe back when you could earn 5% or more interest on your money that advice was worth something, but these days interest on $1,000 for a year probably would buy you 2 first class postage stamps (but some people are pretty happy to find they've saved a chunk of $).


OP, one way to think of it is if owning a house is the only thing that changes on your taxes, then you are basically adding a tax deduction for the loan interest and taxes you pay. For a 30 year mortgage at 3.5%, roughly 2/3 of your PITI would be tax deductible, so if your PITI was $1500, and you are paying a 25% tax rate, then roughly $1000 would be deductible, 25% of which ($250 per month) you would get back on your taxes. Of course that's very rough but it might give you a sense.
Anonymous
Anonymous wrote:
Anonymous wrote:Tax refunds are essentially interest free loans you make to the government, so they're not something you should look at as a good thing.

The ideal tax bottom line IMO and my accountant's, is to owe about $500 or less so you won't have to do estimated payments next year, but you also haven't been giving the govt. the use of your money for free (at no interest).

If you get a big refund adjust your withholding so that you will not overpay so much next year via withholding.

Tax refunds aren't "gifts" or manna from heaven, they're your money coming back to you after not growing for as long as the govt. has held it.



Maybe back when you could earn 5% or more interest on your money that advice was worth something, but these days interest on $1,000 for a year probably would buy you 2 first class postage stamps (but some people are pretty happy to find they've saved a chunk of $).


OP, one way to think of it is if owning a house is the only thing that changes on your taxes, then you are basically adding a tax deduction for the loan interest and taxes you pay. For a 30 year mortgage at 3.5%, roughly 2/3 of your PITI would be tax deductible, so if your PITI was $1500, and you are paying a 25% tax rate, then roughly $1000 would be deductible, 25% of which ($250 per month) you would get back on your taxes. Of course that's very rough but it might give you a sense.


I concur with the thrust of your analysis. However, one thing to add is if you bought points, this can add significantly to your refund.
Anonymous
Anonymous wrote:
Anonymous wrote:Tax refunds are essentially interest free loans you make to the government, so they're not something you should look at as a good thing.

The ideal tax bottom line IMO and my accountant's, is to owe about $500 or less so you won't have to do estimated payments next year, but you also haven't been giving the govt. the use of your money for free (at no interest).

If you get a big refund adjust your withholding so that you will not overpay so much next year via withholding.

Tax refunds aren't "gifts" or manna from heaven, they're your money coming back to you after not growing for as long as the govt. has held it.



Maybe back when you could earn 5% or more interest on your money that advice was worth something, but these days interest on $1,000 for a year probably would buy you 2 first class postage stamps (but some people are pretty happy to find they've saved a chunk of $).


OP, one way to think of it is if owning a house is the only thing that changes on your taxes, then you are basically adding a tax deduction for the loan interest and taxes you pay. For a 30 year mortgage at 3.5%, roughly 2/3 of your PITI would be tax deductible, so if your PITI was $1500, and you are paying a 25% tax rate, then roughly $1000 would be deductible, 25% of which ($250 per month) you would get back on your taxes. Of course that's very rough but it might give you a sense.


Thanks!
Anonymous
Yes rates are low now so you won't earn much in interest, per se, but why in the world would you loan your money to the govt. for free when you can engage in tax planning and keep it for yourself?

That $1k example that I could have given the govt. at no return to me would have earned 8-12% if invested in my portfolio last yr.

YMMV but I prefer to do it that way...

remember too that if points are financed they must be amortized over the life of the loan, so very little deduction per year vs. a cash payment of points...

Anonymous
Anonymous wrote:Yes rates are low now so you won't earn much in interest, per se, but why in the world would you loan your money to the govt. for free when you can engage in tax planning and keep it for yourself?

That $1k example that I could have given the govt. at no return to me would have earned 8-12% if invested in my portfolio last yr.

YMMV but I prefer to do it that way...

remember too that if points are financed they must be amortized over the life of the loan, so very little deduction per year vs. a cash payment of points...



I think that's an apples and oranges comparison. Getting a refund is a perfectly sensible thing to do if the alternative to it was keeping the money in your checking account, or your online internet savings account, or some other short-term, safe investment vehicle. In fact, getting a refund is now the only way to get a paper i-bond and an i-bond is a great investment if you are looking for safe, liquid investments.

If instead your plan is to put every spare nickel into the stock market then I agree getting a refund will involve a short delay in investing those dollars which may marginally reduce (or increase) your return (although anything other than an ACH transfer to a mutual fund would pretty much eat up the money in transaction costs).
Anonymous
Anonymous wrote:Yes rates are low now so you won't earn much in interest, per se, but why in the world would you loan your money to the govt. for free when you can engage in tax planning and keep it for yourself?

That $1k example that I could have given the govt. at no return to me would have earned 8-12% if invested in my portfolio last yr.

YMMV but I prefer to do it that way...

remember too that if points are financed they must be amortized over the life of the loan, so very little deduction per year vs. a cash payment of points...



There actually is a logical reason to over-withhold, but it's not terribly common. The government sells I Bonds: they're guaranteed to earn an interest rate par with inflation, have milder redemption penalties than EE Bonds, and interest earned is tax free if used for college expenses. They are such a good deal that you are limited to buying 10k worth per social security number, per year.

However, if you over-withhold you can request your refund to be in the form of I Bonds, to a limit of $5000 regardless of how much you have already purchased. Now, not many people are buying $25k in I Bonds each year, but it's a sensible thing to do if you're capable.
Anonymous
Why don't you do a quick re-do of your 2012 taxes with the new interest deduction for the months you'll own the house on the schedule A. don't forget to include real estate taxes and points paid. shouldn't take long if you've ever done a 1040 yourself, and you'll know. Then you can adjust your withholdings.

Or if you're worried, wait a year to adjust them and sock the refund into emergency savings for when the first really expensive thing breaks in your house.
Anonymous
Anonymous wrote:
Anonymous wrote:Yes rates are low now so you won't earn much in interest, per se, but why in the world would you loan your money to the govt. for free when you can engage in tax planning and keep it for yourself?

That $1k example that I could have given the govt. at no return to me would have earned 8-12% if invested in my portfolio last yr.

YMMV but I prefer to do it that way...

remember too that if points are financed they must be amortized over the life of the loan, so very little deduction per year vs. a cash payment of points...



I think that's an apples and oranges comparison. Getting a refund is a perfectly sensible thing to do if the alternative to it was keeping the money in your checking account, or your online internet savings account, or some other short-term, safe investment vehicle. In fact, getting a refund is now the only way to get a paper i-bond and an i-bond is a great investment if you are looking for safe, liquid investments.

If instead your plan is to put every spare nickel into the stock market then I agree getting a refund will involve a short delay in investing those dollars which may marginally reduce (or increase) your return (although anything other than an ACH transfer to a mutual fund would pretty much eat up the money in transaction costs).


I don't plan to put every spare nickel into the market, that was just an example (based on a mixed portfolio of stocks, bonds & money market funds that I own)... no critical short term money of ours ever goes into the market, that's for longer term investing.

I agree that the i-bonds are safe but they're not very liquid so if you want to do that as a forced savings for the 1-5 yrs. you have to hold them that makes sense. For a shorter horizon I'd still rather have my money under my control rather than overpaying/overwitholding. You can't always figure it right but with a little time spent more often than not we avoid either large refunds or a large enough bill due to require estimated payments the next year.

For those who can't save as they go, I guess overwitholding and getting the refund is one way to do it, I've just never seen that as a good approach. To each his or her own.
Anonymous
Anonymous wrote:Get back on the tax return, not on the house


A tax return is the form you file with the IRS.

Are you talking about a tax refund?

Not much, because I adjusted withholding to account for the mortgage deduction. I hate tax refunds. Why the hell should i let the government have my money? I'd rather owe every April.
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