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Author: NuvoRiche One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121427  
Subject: Re: Tax planning for 1st-time homeowner Date: 6/3/2007 1:29 PM
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Thanks Debra.

Does your employer match contributions on an annual or paycheck basis? In many 401K plans, maxing out 401K contributions early results in a loss of some employer matching. Are you really able to contribute your entire bonus to the 401K? It depends on the plan. My employer plan limits contributions to 16% per paycheck.

Good points. No matching contributions unfortunately. I am aware of the matching limits that would change the strategy considerably, but they are not applicable in my case, I wish they were! I am allowed to contribute the entire amount of the bonus, up to the IRS limit, in one swoop. I did this successfully last year.

Deductible taxes (for federal) include real estate, state and local taxes. Does the $4,500 estimate for taxes include all of these?

My state has no income tax, and local - well, I don't really know for sure yet. I move to the new area in a few weeks, but I don't think it's going to be much different than where I am now. Where could I go to check on local taxes in the new area?

Did you pay any points for the mortgage?

Yes - I don't recall how many, and all the paperwork is at work. It came out to about $1200 though. Good point about including the points, I'll have to recalculate with that included.

You don't list a ROTH IRA as an option, so I am assuming that your income does not allow it.

I am actually eligible for ROTH contributions as well. However I already have significant retirement holdings, started 10 yrs ago, in a Traditional IRA, and every time I do the math about converting to a Roth it comes to neutral advantage for me to do so. So my Traditional IRA contributions have now been replaced by the 401(k) contributions, and I enjoy the tax deduction from that. Any leftover monies can go into a Roth. I did not do it this past year, because we were accumulating cash for the house downpayment.

Thanks for your comments. This is my first time down this financial path.

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