Just when you thought you had this tax thing down, you decided to look into buying a home! Whether or not you pay more in federal and state taxes could make a big difference in the amount of home loan you’ll be qualified for!
This can get tricky when you’ve been taught all your life to look for perfectly legal loopholes to reduce your adjusted gross income – which in most cases is a good idea, except maybe when getting ready to apply for a home loan.
According to Realtor.com, if you plan on buying a home, the higher your reported income, the bigger the home loan you’ll qualify for.
This could look different for a number of people, depending on your type of income.
Self-employed – Deductions for a home office or work vehicle can reduce your reported income – hang on to the paperwork related to these large deductions so you can explain them to your lender.
Workers with W-2s – One time that having W-2s (or not having them) could count against you is if you’ve recently started a new job, or if you’ve been unemployed in the last two years. Lenders typically look for a consistent work history.Source: http://www.realtor.com/advice/finance/want-to-buy-a-home-better-whip-your-taxes-into-shape/