Mortgage Pre-Approval & Income Qualification

📌 Why It Matters:
Lenders typically require at least two years of tax returns to evaluate your income and approve your mortgage. If you're self-employed or have fluctuating income, how your return is prepared can directly affect whether you qualify.

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Tax Prep Considerations:

• Income Verification (2 years of returns)

• Self-employment income strategy (minimizing deductions vs. maximizing reported income)

• Stability and consistency across tax years

• Debt-to-Income (DTI) ratio optimization

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💡 Example: A Houston-based freelancer may be advised to limit deductions in the year prior to buying a home to present a higher adjusted gross income for loan approval.

Tax Deductions When You Purchase a Home

📌 Why It Matters:
Homeownership unlocks new deductions, but only if you file and document them properly. Your tax preparer can help you decide whether itemizing provides more benefit than the standard deduction.

Common Deductions:

• Mortgage interest (reported via Form 1098)

• Property taxes (up to $10,000 SALT cap)

• Mortgage points (if paid upfront to lower interest rate)

• Mortgage insurance premiums (if income-qualified)

First-Time Homebuyer Credits & Assistance

📌 Why It Matters:
Many states and federal programs offer financial relief to first-time buyers—sometimes in the form of tax credits. Your tax preparer will help you claim eligible incentives.

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Examples Include:

• State-specific first-time buyer credits

• MCC (Mortgage Credit Certificate) programs, offering tax credits for mortgage interest paid

Capital Gains Planning for a Future Sale

📌 Why It Matters:
When you eventually sell your home, capital gains exclusions may apply—but only if you’ve met IRS residency rules and kept good records.

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What to Track:

• 2-out-of-5-year residency rule

• Major home improvements (receipts increase cost basis)

• Distinction between capital improvements and routine repairs

💡 Your preparer can create a running log of improvements to reduce future taxable gain.

Withholding & Estimated Tax Adjustments

📌 Why It Matters:
Homeownership can reduce your taxable income. Your preparer may recommend updating your W-4 or estimated payments.

Benefits:

• Avoid overpaying or underpaying taxes

• Adjust cash flow for monthly budgeting

• ​Prevent underpayment penalties

Home Office Deduction (If Applicable)

📌 Why It Matters:
If you're self-employed and using part of your home exclusively for work, you may qualify for additional deductions.

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Possible Write-Offs:

• Portion of mortgage interest, utilities, homeowners insurance

• Depreciation on the home

• Internet and office-related expenses

Proper documentation is key—your preparer will guide you through it.

AMT (Alternative Minimum Tax) Risk

📌 Why It Matters:
For high-income earners, deductions like mortgage interest and property tax can trigger AMT. Your tax advisor can evaluate this and adjust your filing strategy.

Filing Status & Spousal Coordination (If Married)

📌 Why It Matters:
Joint ownership and tax filing need to be aligned to maximize deductions.

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Your Preparer Will Help You:

• Split or consolidate mortgage and property tax deductions

• Determine the best filing status

• Allocate benefits correctly if filing separately

State Taxes & Residency Changes

📌 Why It Matters:
Moving to a new state? Your tax strategy should shift too.

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We’ll Help With:

• Multi-state filings or proration of income

• State-level deductions or homeowner credits

• Residency tracking and compliance