Tax Time

As we head into the spring buying season it’s important to remember that many people buy at this time of year not just because the weather is nicer and they feel like actually being outside for more than 3 minutes at a time but also because they are getting their income tax refund(s).   The IRS reported that last year the average refund was $2651.  And that’s just their federal refund.  When you add in any state tax refund you have a great recipe for a down payment on a home.  This is the time when those refunds are hitting people’s bank accounts so make sure they know how to turn those refunds into home ownership…

It isn’t just the actual dollars hitting their bank that gets people off the fence there is also a real psychological impact that makes potential buyers feel more secure and ready to make the move into home ownership.  Sometimes we forget how scary and overwhelming that first home can be.  A nice tax refund can ease those fears and make that transition the exciting and pleasant experience it should be. 

This IRS chart shows some interesting stats from last year:

 Filing Season Statistics May 10, 2013

2013 FILING SEASON STATISTICS
Cumulative statistics comparing 5/11/12 and 5/10/13
Individual Income Tax Returns:	2012		2013		% Change
Total Receipts	135,473,000		134,349,000		-0.8
Total Processed	130,261,000		129,674,000		-0.5
E-filing Receipts:
TOTAL	112,089,000		113,954,000		1.7
Tax Professionals	70,344,000		70,380,000		0.1
Self-prepared	41,745,000		43,574,000		4.4
Web Usage:
Visits to IRS.gov	255,269,615		318,408,842		24.7
Total Refunds:
Number	102,522,000		101,082,000		-1.4
Amount	$277.180	Billion	$267.946	Billion	-3.3
Average refund	$2,704		$2,651		-2.0
Direct Deposit Refunds:
Number	79,308,000		79,880,000		0.7
Amount	$231.656	Billion	$228.467	Billion	-1.4
Average refund	$2,921		$2,860		-2.1

Page Last Reviewed or Updated: 21-May-2013

Interesting to note that folks who use direct deposit are those w/the larger refunds.  Now that your buyer has a nice tax nest egg in hand you can show them two more important tax impacts of buying a home:

 #1 – Their income taxes are likely to go down, perhaps substantially, when they buy a home thereby increasing the benefit of buying vs. renting.  Home buyers enjoy a nice deduction for all that interest they pay on their home loan (among other nice deductions you get when you itemize your deductions on your return).  It can mean the difference of $200-$300 per month on an average size home assuming average tax situation. 

#2 – You might suggest they talk to their accountant or HR person at work about changing their withholdings on their paychecks to get a higher net paycheck every month.  This can put more money in their pocket each month and, thanks to their new tax deductible mortgage, perhaps still keep their annual tax bill (or refund) the same as last year. 

Either way you slice it putting that tax refund towards a new home is a great investment and one that pays tax dividends for years to come.

Eric Lundberg - NMLS #261588

President, Chinook Mortgage Ltd - NMLS #261588

Eugene, OR.

541.302.3210

www.ChinookMtg.com