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Estimate How Much Mortgage You Can Afford

mortgage_rate-300x284Interest rates are currently still very low, and that means a lot of people are trying to hurry and buy a house to keep the payments down. If that is your main motivation behind buying a house, you may want to reconsider the decision. But if you have been kicking around the idea already, then now might be a good time to dive a little deeper. Understanding how much house you can afford is the first step to making sure that you don’t get in over your head.

 

 

 

 

 

 

 

Use a Mortgage Calculator

Mortgage calculators are great for helping determine what the payments will be on your new home. All you have to do is plug in the cost of the house, the current interest rates, and the length of the loan, and you can get your monthly payments. Keep in mind that mortgage interest is tax deductible, so if you have a loan with 4% interest, it’s actually going to be closer to 3% after you write the amount off on your taxes.

Taxes and Insurance

Just figuring out the principal and interest payment is not enough. There are also taxes and insurance that will be owed each month. These are very easy to estimate, and if you live in Yellowstone County you can just hop onto the county’s website to find out the current taxes on the property. Insurance is as easy as calling up an insurance agent to get a quote.

Utilities and Maintenance

But principal, interest, taxes, and insurance (PITI) is not all you will have to pay for. There will also be ongoing utility fees (you can get an estimate of these from the current owner), and then those pesky maintenance fees. Keep in mind that you will likely want to keep a bit of a slush fund handy in case the water heater goes out, or you need major servicing on the dishwasher.

Determining how much of a house you can afford isn’t too hard to do. But keep in mind that the costs add up rather quickly, and just basing your estimate on the monthly repayment of the loan could leave you barely scraping by every month after all of the other bills are paid. But there is a way that you can afford the size and style of house you want.

As long as interest rates stay low, the way to afford your house is to simply mortgage less of the cost. Since you can’t negotiate the price as low as you probably would like, you must pay a larger down payment to get the financed portion down as low as possible.

Of course, to pay a larger down payment, you need more cash on hand. That can be accomplished in a few different ways. First, you could earn more money on the side; something that thousands of people across the country do. Or you could apply more of your tax refund to your down payment. Tax season is upon us, and after working with an accountant in Billings, Montana, you should be able to save that money toward your house.

Practical Taxes is a full service accounting firm in Billings, Montana. We have the expertise and the knowledge to get your taxes done quickly, and get you the largest refund possible. Throughout the year we provide business consulting services, nationwide online payroll services, and anything else accounting related that you could need.

Five Important Taxes You Must Know About as a Business Owner

Business-Taxes-300x199Business owners are in the unique position to be able to earn their own living, help the local economy, and provide jobs for others. What this means is that they also have a great deal of responsibility when it comes time to do their taxes. In fact, those taxes can be downright confusing, especially for the new business owner that is used to just filling out a quick tax return every spring. As a business owner, you need to at least have an understanding of these five important tax concepts, and then you still will likely want to enlist the help of an accountant in Billings, Montana.

 

Income Tax

There are various forms of taxation depending on which business model you choose. A partnership will be taxed differently than an LLC; an LLC will be taxed differently than an S Corp; an S Corp will be taxed differently than a sole proprietorship. Understanding your business model, and how your income taxes need to be paid, can save you a lot of trouble when your tax return needs to be filed.

Self-Employment Tax

If you are an employee, then your employer will take care of half of your FICA taxes. However, when you are self employed, you are responsible to pay all of those taxes. Now there are some variations depending on how much you earn, how your business is structured, and a variety of other factors. The bottom line is that if you are self employed, you can expect to pay an additional tax.

Estimated Tax Payments

Most income tax is paid as you go. For instance, an employee has taxes withheld from his or her paycheck. However, if you are self employed, then you will likely need to pay estimated taxes throughout the year. These quarterly filings will help reduce a large tax burden come spring; failing to file adequately and in a timely manner could result in penalties from the IRS.

Employment Taxes

With employees there are even more taxes that you have to know and worry about. You must still tend to your own tax situation, but now you also need to pay half of your employees Social Security and Medicare taxes (FICA taxes), you have to calculate out income tax withholdings, and there is also unemployment taxes to take into consideration.

Excise Tax

There are some businesses that must pay what is called an excise tax. This tax applies primarily to industries that manufacture certain goods. The issue at hand is that these industries have the potential to do a lot of environmental damage, and the tax helps to offset cleanup costs. For instance, transportation of oil or gasoline may be subject to excise tax.

There is a lot to know and understand about taxes when you are a business owner. That is precisely why many people will choose not to worry about the taxes, and enlist the help of an accountant in Billings, Montana instead. They can focus on running their business, and leave the number crunching to the professionals.

Here at Practical Taxes we can handle your business taxes, personal taxes, payroll services, and anything else that has to do with business and accounting.