I am about to purchase a house and our realtor told us that most people change their w4 so that they get a bigger paycheck and no tax rfund. My question is complicated (or at least to me). What can we claim so that we can have less taxes taken from us/bigger paycheck and no or little refund, but without owing the IRS? Our house hold is currently my husband being the sole provider , myself (wife) being a stay at home mom, and 2 kids.
First, the single worst reason to do anything is because most people are doing it. The second worst thing is to take tax advice from a non-tax pro. (Ironic, I understand, but read on)
Run through your 2015 tax return. Do you itemize already? If not, there's a reason, the standard deduction for a couple is $12,600 in 2016, so a renter isn't likely to have enough deductions to itemize, even with a high state tax.
For 2016, project your total interest from the mortgage, and the year's property tax, then add your state income tax, and last, any charitable donations. This total comprises the bulk of what people take on their Schedule A. Now, since your current withholding assumes the standard $12,600, subtract this number, and you're left with the amount your taxable income will be reduced for the fact that you have the house. Last, divide this number by $4000. The result is how many more withholding allowances you can claim. One personal exemption (a withholding allowance) is exactly $4050 this year.
For what its worth, median home price for early 2016 was $190K. After 20% down, a $152K mortgage would cost about $6000 in interest the first year, and maybe $3000 in property tax. The average couple, making $60,000 or so won't have a state bill much over $3000, so shy of some nice donations, it's easy to have a house, yet still not itemize.
Of course, if you have higher income and a more expensive home, the numbers will be different.
The best you can do is to get tax software or use an online service and estimate the 2016 return based on your numbers. If you wish to post numbers via an edit to your question, I'm happy to update my answer a bit to your situation.
Note - the form you'll use to adjust withholdings, the W4, offers a worksheet to perform the calculation.
It asks in line 1 for your total itemized deductions, then subtract the standard deduction, then divide by $4050. Pretty much what I suggested above.
I brought this up to my CPA. She said don't do it. People used to do it, but now they're cracking down. Is it unfair? Yes. But it's the government so don't mess with them.