Home Ownership and Taxes

You are probably aware that the interest you pay on your mortgage and the property taxes you pay are both deductible.

If you go from being a renter to a homeowner, you should expect to pay lower taxes or receive a larger refund come April.  But how about boosting your monthly take-home pay to help your monthly budget?

By filing a revised W-4 with increased allowances, you will increase your net pay on each paycheck.  You could wait until you file your tax returns in April, but you are essentially giving the government a free loan (well, the government certainly needs it).

Each allowance on your W-4 is worth $3,700.  If you add your annual mortgage interest and property taxes, then divide by $3,700, you should get the number of allowances to file for (relating to your home; you may already have other allowances).  You can then use a paycheck calculator to estimate what your new net paycheck will look like.

Of course, consult a tax professional before you take the advice of a blogger.  Your individual circumstances will differ.