Recently, W2 forms arrived in the mail, which means it’s time to gather receipts and other needed forms to file income taxes. For many, it’s a dreaded chore. For others, a potentially hefty bill causes them to fearfully drag their feet into the preparer’s office. For some, a bit of a refund drives them to file quickly, and hopefully make wise choices on how to spend or save those extra funds.
We have good news! Right now may be the right time to boost your financial situation, and maybe even turn your dreams of homeownership into reality. Let’s explore several reasons why.
- Refunds. For those that do receive a refund, when used wisely, it can become a long-term investment. Consider paying down consumer debt, thus improving your credit score, and obtaining a better mortgage rate. Alternatively, a refund could help with closing costs or as a partial down payment on a new home or refinance.
- Housing market. The housing market is hot. This is good news for the homeowner who wishes to refinance. A higher assessed value can allow a homeowner to eliminate private mortgage insurance, qualify for a better loan or take cash out to pay off other debt. For homebuyers, prices are expected to steadily climb, so now is the time.
- Convenience. This is a matter of personal convenience, but once the process of gathering financial information for taxes is complete, you may as well use those documents to begin the mortgage process before filing them away.
- Tax cuts. There won’t be a great deal of change in your 2017 tax return, but the 2018 tax cuts will likely put more money in your pocket soon. New tax rules took effect on January 1, and employers have been asked to use new withholding tables by February 15, 2018. The Treasury Department estimates that 90% of wage earners will see an increased paycheck due to reduced withholdings. While the amount of increase varies depending on income level, Nerdwallet estimates an average raise of 1 to 2%.
- Bonuses. In response to tax cuts, many companies have announced reinvestment into their employees. This includes AT&T, Bank of America, FedEx, Lowes, Walmart, Southwest Airlines and more. If you’re one of those fortunate employees, refer to our information above regarding refunds.
- Tax changes that did not occur. It was feared that the mortgage interest deduction would be eliminated, but it was saved, albeit with a lower cap. The standard deduction is now significantly higher, which results in a simpler tax process and lower amount of taxable income for many. Whichever deduction option you choose, 80% of Americans will see overall lower taxes when they file their 2018 returns.
Of course, tax preparation and withholdings are quite complicated. We suggest that you visit a qualified professional to file your taxes quickly, in order to have more money in your pocket, and get prequalified to become a homeowner or refinance for a better financial future.