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Utilize That Tax Refund to Benefit Your Future Self
While every tax refund is different, if you received a refund this year, it’s likely that it is larger than in years past. On April 15th CNET shared that:
“The average refund size is up by 4.6%, from $2,878 for 2023’s tax season through April 7, to $3,011 for this season through April 5.”
There is a good chance that your tax refund not only was larger, but it also may have hit your bank account by now. If you haven’t spent it already, keep reading for a couple ways you could leverage it with real estate.
First and foremost, purchasing real estate is like investing in yourself. Each payment you make towards your mortgage lowers your debt and increases your equity. Combine this increase of equity with the historical average home price increase of 5% per year, and it becomes clear that homeownership can be a powerful wealth-building strategy. Over time, not only do you build equity through mortgage payments, but your home also typically appreciates in value. Each payment further enhances your overall financial position. Can we agree that spending a little extra now on a mortgage of our own to pay out a greater return in the future could be worth it? If you are open to this idea of wealth building let’s discuss how you could utilize that tax refund to benefit your future self.
Saving for a Down Payment
One of the greatest obstacles for attaining home ownership is saving enough for a down payment. Your tax refund might just be the boost in income you needed to make homeownership a reality. Lucky for you the 20% down payment requirements of the past are long gone. However, there are benefits when you do put down 20% check them out here. Today, lenders have options as low as 3% down. If you are a military Veteran there are 0% down VA Loans. Learn more about them here. Check with your lender to see what you qualify for and if these loan types will benefit your home goals. If you are not currently working with a lender connect with us and we can help you locate a few.
Pay Closing Costs
Closing costs are the fees and expenses incurred when finalizing a real estate transaction. They typically range between 2% and 5% of the total purchase price of the home. These costs encompass various expenses, such as loan origination fees, appraisal fees, title insurance, and property taxes. Considering these expenses, directing your tax refund toward covering closing costs can help alleviate the financial burden at the time of closing.
Reduce Your Mortgage Rates by Purchasing Points
If rates today mean affordability is tight, consider talking to your lender about reducing your mortgage rates by purchasing points. You could use your tax refund to buy down your interest rate. Talk to your lender to see if you qualify and if this option is right for your homeownership goals.
Make Extra Payment Towards Your Mortgage and Reduce Overall Interest
Another alternative, if your loan allows for it, is to make additional payments towards your mortgage loan. Each additional payment reduces your total pay off amount. Your payment remains the same, it just means with each additional payment your mortgage will get paid off sooner. Check with your lender, but depending on your loan type, if you pay it off earlier your total interest paid is less than it would have been if you made regular payments.
Whether you are ready to buy now, or in the future, connecting with a trusted real estate professional that understands the process and your options to ensure that you are ready to buy is of the utmost importance. If you are not currently working with a Realtor, connect with us today. We can help you utilize that tax refund to benefit your future self.
Avoid These 9 Tax Filing Errors
There are people that stay organized all year long and file their taxes as early as humanly possible while others will wait till the very last minute. Some people tackle the task themselves while others hire out to relieve them of the stressor. Regardless of which side of the spectrum you are on, the deadline for filing your taxes is quickly approaching and everyone is susceptible to making one of these common mistakes. We would like to help you file successfully by not only making you aware of these mistakes but also by offering a digital download checklist for you to print and keep with you while you file.
According to the IRS, there are nine filing errors that most commonly cause a rejected status. Make sure you don’t become a statistic and be sure to double checking these nine things.
1. Incorrect or missing social security numbers
We don’t often use our social security numbers. They can easily be forgotten or transposed when typing quickly. Be sure to slow down and enter your number exactly as it appears on your social security card. Don’t forget to give it a second look just to be safe.
2. Dependent’s name(s) are incorrect or misspelled
It is easy to write the name you call your child all year long rather than their legal name. Be sure to write their name exactly as it appears on your dependent’s social security card.
3. Wrong filing status
There are five filing status: single, head of household, married filling jointly, married filling separately, and qualifying widow(er). Click here to see the full recently updated Publication 501 to determine which one best fits your unique needs.
4. The dreaded math errors
We have all done it at some point in life. Miss typed a number, calculated incorrectly, hit to many 0’s and suddenly, our numbers are all off and we don’t know where we went wrong. When it comes to taxes it is even more important to double check our work. If you are aware that you are not good with numbers perhaps it is one of those let the professionals handle the task or consider filing electronically to help reduce the error of mistakes. If you are looking for someone local Northwest Bookkeeping comes highly recommended!
5. Electronic filing PIN errors
With that said… keep in mind that when filing electronically you are required to select a Personal Identification Number. Make sure it is a number you will remember and keep it safe.
6. Incorrect Adjusted Gross Income
Additionally, something to keep in mind when filling electronically is that you might find yourself prompted to enter the adjusted gross income from the previous years tax return. Make sure you are entering not only the right year but also the right amount.
7. Wrong bank account numbers for direct deposit
Can you only imagine finally having everything done and not getting your direct deposit because you entered your bank account information incorrectly? Take the extra time to double check you have input your account number correctly.
8. Claiming the wrong tax credits or deductions
Read the instructions of the form carefully and fully to ensure you qualify for the credit or deduction you are claiming. Claiming the wrong ones can lead to a rejected status or worse.
9. Submitting without signatures
Did you know that if your file unsigned it is automatically invalid? Save yourself the trouble and double check that all signatures are completed.
We hope you have a smooth tax filing experience and if you have any questions when it comes to including a purchase or sale of real estate in your tax filing just give us a call! We would be delighted to help!
