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Money Talk > Taxes

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willie_52
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Interest only mortgages  Reply with quote  

I find myself in a position that paying off my home may not have been a good thing. I am asked to consider borrowing money on my home to develop deferred interest so that I could lower my taxable income. I believe that I could lower my tax responsibilities from 27% to 15% which is a huge difference. Please correct me if I am wrong but 47,000 or less is taxed at a rate of 15%? Is there a limit on how much defered interest can be claimed in any one year? Are there any traps or pitfalls that I should be aware of before going forward?
Post Mon Jun 12, 2006 12:35 pm
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coaster
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The higher tax rate only applies to the income over the breakpoint. You're going to end up paying more in interest than you save in taxes.

Here's an article about marginal tax rates: http://www.invest-2win.com/Brackets.html

~Tim~
Post Mon Jun 12, 2006 12:43 pm
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Rolo
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Taxes should not be a #1 factor in financial decisions.

However, mortgage money is CHEEEEAAAAAP and you can get ahead if you invest it, earning more with investments than you pay to borrow it. The tax break is icing on the cake an a part of the overall plan.

In short, generally speaking, paying off a house is a very bad idea which most people do for emotional reasons rather than financial ones.

"Expect me when you see me."
Post Tue Jun 13, 2006 12:44 pm
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willie_52
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Thank you for the advice. As was sugested I need to compare interest rates to investment potential. If only the stock market would settle down a touch.
Post Tue Jun 13, 2006 6:41 pm
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LottomagicZ4941
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quote:
Originally posted by Rolo
Taxes should not be a #1 factor in financial decisions.

However, mortgage money is CHEEEEAAAAAP and you can get ahead if you invest it, earning more with investments than you pay to borrow it. The tax break is icing on the cake an a part of the overall plan.

In short, generally speaking, paying off a house is a very bad idea which most people do for emotional reasons rather than financial ones.


Also 401Ks and the like are protected assets. Just ask OJ Simpson. Equity is not if you should say be unethically terminated by an employer like P.V.Y.S.C. who is worse then the fig tree Jesus cursed.

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Post Fri Jan 12, 2007 5:16 pm
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coaster
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My apologies to the active member who appended a lengthy post to this thread, which was inappropriately resurrected (against forum rules) by the immediately preceding post. Members: please pay attention to posting dates. It just kills me to have to remove a post someone spent good time and effort on simply because someone else violated forum rules and reactivated a very old and very dead thread.

~Tim~
Post Sat Feb 16, 2013 7:10 am
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Nagelon
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Mortgage loans are generally structured as long-term loans, the periodic payments for which are similar to an annuity and calculated according to the time value of money formulae. The most basic arrangement would require a fixed monthly payment over a period of ten to thirty years, depending on local conditions. Over this period the principal component of the loan (the original loan) would be slowly paid down through amortization. In practice, many variants are possible and common worldwide and within each country.
Post Fri Dec 13, 2013 5:58 am
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littleroc02us
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quote:
Originally posted by Rolo
Taxes should not be a #1 factor in financial decisions.

However, mortgage money is CHEEEEAAAAAP and you can get ahead if you invest it, earning more with investments than you pay to borrow it. The tax break is icing on the cake an a part of the overall plan.

In short, generally speaking, paying off a house is a very bad idea which most people do for emotional reasons rather than financial ones.

Not paying off a mortgage to keep a tax deduction isn't mathematically smart. If you have a mortgage where you pay $10,000 a year in interest to the bank and your in the 25% tax bracket, you'll save $2500 on your taxes. So tell me why paying 10k to the bank in interest is a mathematically sound idea in order to get back $2500. I don't know about you but if I had a paid for house, I'd have nothing but disposable income to invest and get mighty weatlhy with much lower risk then borrowed money.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Sat Dec 14, 2013 4:50 am
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