What You Need to Know About Taxes and Usable Income
Death and taxes. I think you know where I’m going with this. And if you were one of the people that thinks you might have the latter beat, this blog post is for you.
Taxes. You make money, you report your income and you pay taxes on it. And for anyone who’s been working full time for over a year can tell you, taxes aren’t cheap. Any anyone who filed more than once can tell you, there’s ways to minimize the amount you pay. That’s right, write offs.
So everything is all good right? Well that might not be the case if you are looking to purchase or refinance a home.
There are a lot of ways to avoid paying taxes on a lot of things, income, rental properties, flowing the money through a corporation. But here’s something you might not have known about this, the income you report on your taxes is what you get to use when qualifying for a mortgage. You may be able to lower your taxable income, but you’re also lowering your usable income.
This is something that is very important to consider if you are self-employed or are someone who just knows there way around their 1040s. Lenders always want to see the last two years tax returns and if they see a pattern of low taxable income, they are inclined to use that figure over what your actual income may be.
Now I’m not saying don’t get creative with your taxes, but if you do, and purchasing or refinancing a home might be in the near future, it is absolutely worth considering. That being said, some things the lenders are pretty stern on and others not so much, and we don’t expect you to know these things, that’s our job. So if anything above resonates with you, I encourage you to reach out to us.
858.273.3663 ext 114