When I purchased my very first home back in 2006, I was very happy, excited, and nervous all at the same time. The first two emotions for obvious reasons, but I was very nervous about my finances. Of course, everything went well in terms of loans and monthly payments and such, but I literally pushed myself into the edge of the cliff, with very little room for error. I was living paycheck to paycheck with very little or no savings. I had to pay attention to every loose coins I received in change, making sure I put them away in my coin jar for use later. However, a friend of mine quickly reminded me of tax deductions. I was able to increase my allowances and instantly give myself a $500/mo raise. Because all of the interest and property tax I pay on the new mortgage and home are tax deductible, I had a choice of either getting a huge check in my next year’s tax return or pay less tax every paycheck now. I decided on the latter and instantly gave me some financial breathing room.

If you’re in a similar situation, you can recalculate the number of allowances you can have. Just go to www.irs.gov and look for withholding calculator, or just google “withholding calculator” and click on the IRS website. Or you can just click here. http://www.irs.gov

Fill out all information and in less than 5 minutes, you’ll have better idea how many allowances you can take up to in your paycheck.

• 2010 Tax Brackets: Filing Jointly