Effect on tax return after you buy a house?

amother

Ivory

Mon, Feb 11 2019, 12:29 pm

hi,

any imamother accountants that can help me!

what effect does buying a house have on your tex return?
do you pay more tax? im assuming you can see that you bought a house (im worried about this bc the tuition commitee looks at this for tuition assistance)
any other pointers you can tell me ? I really appreciate it!!
thanks!

amother

Gray

Mon, Feb 11 2019, 12:31 pm

amother wrote:

Doesn't the scholarship application ask if you own your home and how much you pay in housing costs anyway?

amother

Lime

Mon, Feb 11 2019, 12:46 pm

amother wrote:

I presume that you'll take a mortgage deduction, which will reduce your tax liability.

I also presume that you would not want to hide assets or resources from the tuition committee, effectively stealing from the school and is donors, so that it won't matter if they know what you have.

Amarante

Mon, Feb 11 2019, 1:06 pm

The impact on your tax return is that you would generally owe less in taxes because mortgage interest and property taxes are deductible. Of course, Trump's Tax Act punished the Blue States which generally have high property taxes and expensive homes by limiting all deductions for state taxes (property and income) to $10,000.

As to impact on tuition assistance, that would depend on each school's policy but I would presume every application asks for your housing expenses and if you own breaks it down into mortgage payments/property taxes and amount still owed on mortgage.

amother

Seagreen

Mon, Feb 11 2019, 1:10 pm

You can deduct interest but with the new standard deduction and the new limit on state taxes which includes property tax, not sure if that would even have an effect over your standard deduction. But if anything your income taxes would be lower (but bear in mind you will now most likely have property tax).
It also depends in what state you live as there might be state tax credits for homeowners who pay property tax.

amother

Ivory

Mon, Feb 11 2019, 1:12 pm

Amarante wrote:

thank you,
isnt the standard deduction 24,000 for a couple , so anyway this wont apply? (like I would take the standard deduction option not the itemized )
unless I completely dont know what I am saying... would you be able to clarify?
.thank you for all this info I really appreciate it

and I would not be buying a house where I live bc I cant afford it ,(so it wont really come up on my school application) I have a little money from my parents and I wanted to buy a small cheaper house in a different state with this gift

amother

Ivory

Mon, Feb 11 2019, 1:15 pm

amother wrote:

thank you, basically you would be able to see it very obviously when I hand in my tax return to the school?
im just thinking if it will be a good buy

Amarante

Mon, Feb 11 2019, 1:19 pm

The standard deduction has been raised so many people will take the standard deduction instead of itemizing taxes.

If you take the standard deduction, home ownership has no impact since you don't get the benefit of deducting the mortgage interest and property taxes - or state income taxes which are also deductible. Also no medical or charitable deductions.

In terms of your tax return, it really depends on your income and specific circumstances. While a tax deduction is nice, I don't think I would buy a home just for the tax deduction. It is generally just a factor when people determine what their net living housing expenses are - I.e. property and mortgage are X but after tax deduction they are Z versus rent which is Q.

Of course a deduction is not the same as a credit since a deduction is only as valuable as your tax bracket since you are only saving what would have been taxes payable on the deducted amount versus a tax credit which is subtracted directly from taxes owed.

For example, if you buy health insurance through Obamacare, the subsidy is actually a credit versus a medical expense which is a deduction if your medical expenses exceed a certain percentage of your AGI.

amother

Ivory

Mon, Feb 11 2019, 1:22 pm

Amarante wrote:

THANK YOU, so I think I would take the standard deduction anyway. We are not in such a high bracket (50k a year)
so my question is will it be written on the return that we own a house?

amother

Lime

Mon, Feb 11 2019, 1:23 pm

amother wrote:

THANK YOU, so I think I would take the standard deduction anyway. We are not in such a high bracket (50k a year)
so my question is will it be written on the return that we own a house?

Will you be renting it out? If so, your return will show rental income.

mommyhood

Mon, Feb 11 2019, 1:25 pm

amother wrote:

thank you, basically you would be able to see it very obviously when I hand in my tax return to the school?
im just thinking if it will be a good buy

You're looking to live in the home or buy an investment property? If you live in it and don't itemize there will be no impact on your taxes. If you do have enough expenses to itemize it will show up and you will pay less taxes. If it's an investment property you'll need to report the rental income and expenses so it will be on your return regardless of whether you itemize.

Amarante

Mon, Feb 11 2019, 1:26 pm

If you are filing a short form with no deductions, your return will (I am almost certain) just contain your income minus the standard deductions and amount of taxes owed.

However, this has nothing to do with tuition assistance applications as I believe that schools would have questionnaires in addition to the tax return. The tax return is required because it is a legal document and it is assumed people aren't going to lie to the IRS so that verifies your household income.

However, most tuition assistance applications would have other factors which they take into account and I would suspect that actual lifestyle choices would be part of that including a question about home ownership.

amother

Ivory

Mon, Feb 11 2019, 1:28 pm

Amarante wrote:

right I understand what you are saying, but I feel like they will say you can afford a house you can afford to pay . even after I fill out my form

amother

Ivory

Mon, Feb 11 2019, 1:29 pm

mommyhood wrote:

yes I will rent it out so it can cover the mortgage

Amarante

Mon, Feb 11 2019, 1:48 pm

amother wrote:

yes I will rent it out so it can cover the mortgage

If you buy a property as an investment with a rental, you really need to consult a tax expert because you will have a completely different tax form to fill out in which you need to itemize business (rental) income against expenses. And that preparer will help you with what expenses are deductible.

Also, many people have rentals that actually provide losses for the purposes of taxes because of depreciation or expenses that can be charged against income.

However, when you sell the house all of this would impact any capital gains taxes.

No one on a forum can advise you on this nor can anyone advise how owning a home with a rental will impact tuition assistance.

amother

Gray

Mon, Feb 11 2019, 2:30 pm

amother wrote:

right I understand what you are saying, but I feel like they will say you can afford a house you can afford to pay . even after I fill out my form

I assure you that every school has parents receiving scholarships despite home ownership. They will make that determination by looking at a combination of your income and expenses, regardless of home ownership status.

amother

cornflower

Mon, Feb 11 2019, 4:42 pm

If you are renting out the house, you can likely get a tax deduction for expenses. Even if expenses exceed income (from the rental property) you can likely still deduct the loss. It pays to run this by an accountant to find out if this will work for you.

amother

Pewter

Mon, Feb 11 2019, 7:36 pm

amother wrote:

THANK YOU, so I think I would take the standard deduction anyway. We are not in such a high bracket (50k a year)
so my question is will it be written on the return that we own a house?

No, it is not written on the return that you bought a house.

If you properly report rental income, then it will be obvious that you own a house.

amother

Pewter

Mon, Feb 11 2019, 7:41 pm

Amarante wrote:

Trump's tax act didn't "punish" the blue states. He removed (or rather, reduced) the ability to freely take state and local taxes as a deduction on the federal return. This improves parity on the federal level. Until this fix, a person in Wisconsin paid more in federal taxes than a person in New York with identical income, because the NYer got a deduction on his federal taxes for his sky-high NY taxes. Absolutely unfair to the Wisconsinan, and the vast majority of Americans who choose not to live in sky-high states. You want to live in a sky high tax state? Great. Don't expect the rest of the nation to subsidize it. Or better, when the fix is finally in, don't call that "punishing." Call that "restoring parity."

I wouldn't have hijacked the thread except you already did.

Signed, a CPA who is happy to see parity restored.

rachelmom1

Mon, Feb 11 2019, 7:51 pm

Never parity was a theme with the IRS. I get to deduct mortgage interest if I own a home but the one who rents gets nothing

How about the child tax credit. Why should they receive more than one without children.

The IRS has an agenda disguised as parity

amother wrote: