Feb. 5, 2019.
Tax returns are expected to be bigger and better in 2019, especially if you’re married with children. According to Morgan Stanley research, Americans have been over-withholding and could get back 26-percent more than in 2018. This adds up to $62 billion extra in refunds than the $235 billion issued last year.
Most people see tax-free funds as a bonus that can be used for fun or to put toward a larger purchase. Even with the new tax law that went into effect for 2018, Morgan Stanley said people are still slow to change their withholding. With up to 26-percent more cash coming, this could be a great opportunity for homebuyers to put together a down payment.
What about the new tax credits in 2019? Here’s how they help
The IRS started accepting this year’s tax returns as of January 29. Based on SmartAsset data ranking states by their tax refund size for 2019, you could expect back an average of $3,163 if you overpaid your taxes. Some of the largest tax returns are received in the Northeast, with Connecticut topping the list.
Using some of the new tax credits in 2019 could make your return — and your down payment — even bigger.
1. Increase in the Child Tax Credit.
The tax reform that passed back in December 2017 doubled the Child Tax Credit maximum:
- With higher income limits, more families are eligible and could get more back. The credit increased from $1,000 to $2,000 for each child who qualifies and maxes out at $400,000 for joint-filing married couples — a major increase from the married couple max of $110,000 in 2017.
- Up to $1,400 of the tax credit may be refundable for qualifying children. So, if you’re an eligible taxpayer, you could get money back even if you don’t owe taxes.
- Read more about the Publication 972/Child Tax Credit here.
This increase is significant for many filing in the 2019 tax season. As IRS Commissioner Chuck Rettig said:
“I want to remind taxpayers to take advantage of this valuable tax credit if they are eligible to claim it. Tax reform changed the tax code significantly and doubling the Child Tax Credit is an example of how the changes impact taxpayers.”
2. New Credit for Other Dependents.
The new tax law also created a brand-new tax credit to provide more cushion for family dependents:
- The $500 Credit for Other Dependents is available to any additional dependents a taxpayer can’t claim under the Child Tax Credit.
- These Other Dependents are likely to include children ages 17 and older at the end of the 2018 tax year and/or parents and other relatives being supported.
- Use the IRS Interactive Tax Assistant to see which Other Dependents qualify.
Still saving for your down payment? We’ve got low- and no-down-payment loans for that. Prequalify Now and find out how much your tax refund can help.
These tax credits are good news for homebuyers. Mortgage programs from Fannie Mae, Freddie Mac, and the Federal Housing Authority (FHA) all require much less than 20-percent down. Typical down payment amounts may start as low as a 3.5-percent minimum, with the potential for a no-money-down payment for qualifying veterans using the VA mortgage. USDA loans in eligible rural and suburban areas also require no money down.
If you put your tax return toward your down payment, you might be surprised how close you could get to 3.5-percent down.
Think about a minimum 3.5-percent down payment on a $250,000 house. Getting back 26-percent more than the average, based on Morgan Stanley projections, could bring you more than halfway to your goal. And, there are Down Payment Assistance programs for those who qualify, bringing you even closer to making your dreams of homeownership come true.
Remember: You don’t need 20% to buy
Saving for a down payment doesn’t have to take long, not when there are low- and no-down-payment mortgage programs that can cut the upfront cost of buying. Using your tax refund could make buying even easier. Connect with a local loan officer who specializes in low-down-payment mortgages, find out how much your tax return can help, and get ready to own in 10 days.*
*10-day close not typical. Not all loans will close in this timeframe.
For educational purposes only. Cornerstone Home Lending, Inc. and its affiliates do not provide tax advice. Please consult your professional tax advisor for specific guidance.
Sources are deemed reliable but not guaranteed.