Could TurboTax help me figure out how my income and mortgage payment (or rent) affect the tax breaks I get?
Praveen Pradeep asked:
I am trying to figure out if I am better off renting or buying but cannot make an informed decision without understanding how it will affect my tax breaks.
I am trying to figure out if I am better off renting or buying but cannot make an informed decision without understanding how it will affect my tax breaks.
Sure.
If you rent, you pay rent and nothing about it goes on the tax return.
If you own, at the end of the year you will have paid mortgage interest and property taxes.
In the first year, you may pay just mortgage interest and only for part of the year. You may or may not have paid any property taxes…so don’t change your withholding at work or assume you get a tax break that first year….
So get a feel for the interest and taxes and put together a dummy return. These will go on schedule A and if the total is more than $5450 (single) or $10,900 (married, filing jointly), you will get lower income.
To do this with Turbotax, use last year’s forms and say yes when it asks if you paid interest, etc.
Do not buy a home just for the potential ‘tax breaks’. If you are an average guy income wise there is really not much of a tax break to buying a home. The best way to buy a home is 100% down. Not many of us can do that though. Go to daveramsey.com and do some reading.
Yes with turbotax its easy to calculate different scenarios. The net effect on taxes (refund or what you owe) is calculated in real time – so if you make modifications to any of your numbers you can see what the net effect would be.
And by the way, you do not get any tax breaks for renting unless you own your own business.