Tis the season for tax refunds!
For some, it is a happy time because they expect to receive a refund of a portion of the taxes they paid throughout the year. For others this is a time to pay the government the amount of taxes that are owed to Uncle Sam. Let’s take a moment to review what an income tax return really is and what a tax refund consists of.
An income tax return is a declaration of personal income earned annually to government or taxing authorities. Returns are filed with either the federal, state government, or both entities.
An income tax return is used as a basis for assessing an individual's liability for unpaid taxes or for receiving a refund of income taxes paid. A refund of excess taxes paid during a given tax year such as 2017.
Federal tax returns must be filed every year for an individual or business that received income during the previous year, whether through regular income (wages), interest, dividends, capital gains, tips or other forms of profit.
Governments impose an income tax on an individual’s or a business’s financial income.
By law, businesses and individuals must file an income tax return every year to determine whether they owe any taxes or are eligible for a tax refund.
Income tax funds are a key source of revenue that the government uses to fund its activities and serve the public.
Now that we have gotten a few definitions out of the way, let’s look at what you can do with your tax return to help you reach your dream of homeownership.
Income tax season is the perfect time to maximize your savings for buying a home. Instead of buying a car which loses its value over time, consider buying your first home which increases in value over time. You begin building equity when you buy a home.
With the equity value in a home, you are building value in an investment. And the tax deductions that become available to you as a homeowner will reduce your income tax bill substantially.