Finding tax deductions these days has become more difficult. Everyone wants to pay less in income tax. The issue is when lowering your taxable income or adjusted gross income, it also reduces your purchasing power when qualifying for a home loan.
One deduction for wage earners, the schedule A unreimbursed expense, creates a problem for those trying to qualify for a home loan, either a purchase loan or refinance loan. I'm not an accountant but I'll tell you from my point of view what the schedule A unreimbursed expense looks to be. The schedule A unreimbursed employee expense covers items that are purchased using your personal funds that are necessary for your job description that your employer doesn't pay for. Unreimbursed expenses can range from clothes, to mileage, car repair, and other things.
The damage the unreimbursed employee expense comes into play when qualifying for a home loan. Say you have $5,500 in unreimbursed employee expenses listed on your 1040 for the year 2010. The lender will take that amount and divide it by 12 months, in this case $458.33 per month and include the payment into your debt to income ratios. The lender will average the past two years in schedule A unreimbursed employee expense or in some cases if the most recent year was greater than the prior year, they will use that figure for a worse case scenario.
Assuming a 30 year fixed rate of 4% that $458.33 per month is a loss in purchasing power of over $96,000 for a new home purchase! On a refinance loan, it means you qualify for $96,000 less of a loan! Breaking it down further, assuming the information above, per $100 you pay in minimum monthly payments to your creditors, you lose $21,000 in purchasing or refinance power.
What to do? Individuals can file an amended tax return, but it can mean that you may end up owing ฝากขายทาวน์เฮ้าส์ the federal government money after deleting this deduction and there may be a tax penalty involved.
Being that it's the beginning of a new year, most people have yet to get their taxes done. A W2 wage earner seeking to buy a home in 2012 may want to scale back their schedule A unreimbursed expenses for the year 2011 or eliminate it altogether. Many homebuyers that I encounter with this expense have no clue it affects them when it comes to qualifying for a home loan. Choosing not to take the deduction may bring less of an anticipated tax refund, and it may even have you owing tax depending on your situation and tax bracket but on the flip side, it does help you qualify for a larger home loan.
If your income can absorb the additional monthly payment created by the schedule A unreimbursed employee expense, than you may be okay, but there are many people out there who are unable to purchase or refinance for their loan amount desired simply because they weren't aware how the schedule A unreimbursed employee expense affects them when it comes time to qualifying for a home loan.
An experienced Loan Originator should be able to detect this before they run your credit report. The Loan Originator should ask a few questions in regards to your employment. Many sales professionals, nurses, blue collar workers among others are entitled to this expense. If the home loan applicant's income is sufficient to absorb the monthly obligations, new housing payment as well as the schedule A unreimbursed employee expense (if there is one) than hopefully you'll be able to qualify for your new home loan whether it's for a purchase loan or a refinance loan.
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