Homeowner's tax right off

Discussion in 'Off-Topic Discussions' started by Abner, Sep 29, 2017.

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  1. Abner

    Abner Active Member

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    I owe $96,000.00 on my house in order to pay it off. I know that I will lose my tax deduction once I pay it off. Does anyone know what the write off rate is for being a homeowner? I hope I this makes sense.

    Thanks! :smile:
     
  2. Johann

    Johann Active Member

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    Forgive a Canadian for getting in on this one, Abner - but isn't the "Tax writeoff" you mention related to mortgage interest? I believe you subtract from your income the amount of mortgage interest you've paid in the past year. You can easily figure what the tax saving is, depending on your bracket etc.

    When you've paid the mortgage off - no interest, so no deduction. Unless I'm missing something. This is a tax provision we Canadians envy. We don't have it, here.

    J.
     
  3. decimon

    decimon Active Member

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    The tax advantage becomes part of the value of the house which becomes part of the price of the house.
     
  4. me again

    me again Active Member

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    There are two kinds of tax write-offs:
    - mortgage deduction (like your 96k)
    - property taxes

    This writer is not sure if the mortgage calculator is accurate, but you can check it out here:
    Mortgage Interest Tax Deduction Calculator - Bankrate
     
  5. Abner

    Abner Active Member

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    Thanks! I appreciate it.
     
  6. cookderosa

    cookderosa Resident Chef

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  7. Johann

    Johann Active Member

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    Pretty simple. From the article:

    "What these idiots are saying all over America is that you need to keep your tax deduction—and you’re an idiot if you believe that." i.e pay the mortgage off (stop paying interest) as soon as you can.

    Me-again mentioned the property tax credit. Well, at least we have that one in Canada - where I live, anyway. It's part of the Provincial tax return, here. And that credit has nothing to do with mortgage / no mortgage.

    J.
     
    Last edited by a moderator: Sep 30, 2017
  8. me again

    me again Active Member

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    If you take 30 years to pay off a standard mortgage, then you will end up paying over three times the value of the home, due to the compounding interest rate. For example, if you agree to pay 100k for a house, then at the end of 30 years, you will have paid about 300k, due to the accrued interest rates. The banker makes the most money when you don't payoff your loan. No annual tax write-offs can justify or recoup paying 300k for a 100k home. Debt free is the way to be.
     
  9. Johann

    Johann Active Member

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    Yay! Took me far too long - but it's good being here!

    J.
     
  10. Johann

    Johann Active Member

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    100% true. But this will take SOME of the sting out of it, if you have to carry a mortgage:

    If you take 30 years to pay off a standard mortgage, you will end up paying over three times what your home was worth 30 years ago, when you borrowed the money. If it's now worth TEN times what you paid 30 years ago -- it doesn't feel QUITE so bad! Likely, if you hadn't signed that mortgage - there's no way you could have afforded to buy that home. Even if, years later, you saved up the entire initial value of the home, the price would probably have gone up to exceed your savings by a considerable amount. And you'd have foregone years of living in the home.

    A mortgage of some sort is a necessary evil for most - and yes, you can save a lot of money if you pay it off early. Even simple things help, like getting on weekly or bi-weekly payments. That way, you make payments above the traditional 12 a year and reduce both debt and time-to-zero quite a bit. And when mortgage-shopping, watch what provisions are available for periodic principal reduction, without penalty.

    J.
     
    Last edited by a moderator: Sep 30, 2017
  11. Johann

    Johann Active Member

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    "My mama told me, "You better shop around, (shop, shop)
    Oh yeah, you better shop around." (shop, shop around)" - Smokey Robinson
    :smile:

    J.
     
  12. Johann

    Johann Active Member

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    And here's a cautionary tale about a man with several mortgages:

    "As of February 2017, Manafort had about $12 million in home equity loans outstanding. For one home, loans of $6.6 million exceeded the value of that home; the loans are from the Federal Savings Bank of Chicago, Illinois, whose CEO, Steve Calk, was a campaign supporter of Donald Trump and is a member of Trump's Economic Advisory Council.[77] It was subpoenaed in July 2017 by New York prosecutors about the loans they had issued to Manafort during the 2016 presidential campaign. At the time these loans represented about a quarter of the banks equity capital."

    From here: https://en.wikipedia.org/wiki/Paul_Manafort

    "Neither a borrower, nor a lender be; For loan oft loses both itself and friend." - Polonius, in Hamlet.

    J.
     
    Last edited by a moderator: Sep 30, 2017
  13. Abner

    Abner Active Member

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    I refinanced to a 15 year loan several years ago. The rate of interest is very low. I paid $165,000.00 over twenty years ago when the real estate market tanked. Houses like mine are selling are for approximately $625,000.00 right now. I couldn't afford to buy my house at today's prices.
     
    Last edited by a moderator: Sep 30, 2017
  14. Johann

    Johann Active Member

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    Well, thank goodness for the "necessary evil" of a mortgage, then. Now, you don't have to... :smile:

    J.
     
  15. Abner

    Abner Active Member

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    Yeah, my mortgage is less than what it would have cost me to rent. I live in the OC (Orange County, CA) and the home prices and rent prices are very high. Lord willing, I will have my house paid in 9 years. I will be the ripe age of 60, which is still relatively young by today's standards. Time seems to be speeding up the older that I get! :smile:
     
  16. John Bear

    John Bear Senior Member

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    Let us not forget that when you sell the house and move to Humptulips* you pay no capital gains taxes on the first $500,000 of profits: a personal gift to you from Newt Gingrich.

    ________
    *I actually saw Humptulips mentioned in a news story the other day. https://en.wikipedia.org/wiki/Humptulips,_Washington
     
  17. cookderosa

    cookderosa Resident Chef

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    Since we're on the topic of mortgages, and several of you are ALSO like me in striving to live a debt-free lifestyle, I have a question about something that Dave would veto, but I am considering anyway. We bought our house 5 years ago at the low point after the housing bubble for 175k. We currently owe $135k BUT the good news is that the last 4 homes on my street (similar in every way to ours) sold for better than $280k. If I put our home on the market today, no question we'd get $260-$280 as is. So..... we are house rich cash poor. I need to buy a new roof (house+gazebo+shed), new HVAC ducts, and new water heater (~$15k all in). I WANT to upgrade our back deck, add a porch, add a bathroom, and do a minor change to our existing bathroom that would allow adding the new bathroom (~$40k). In short- we are considering doing a refinance to pull out equity. NOT a HEL or HELOC, but a full refinance. My "needs" list doesn't add value since they are maintenance items, but my "want" list would, and the increase in our payment would be much less than if we were to do something like a HEL/HELOC. Last piece of the puzzle- we don't plan to move for at least 7 years.
    Opinions? Should we do it?
     
  18. Abner

    Abner Active Member

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    I would probably side with Dave on this, but then again I am VERY frugal. You have to decide if you are ready to live in a construction zone, and pray that you find a good decent contractor who won't try to dick you around (I have learned that home projects always seen to cost more than the original price. Things like a new roof are inevitable and have to be done. As far as the bathroom, I would ask a local real estate agent if it would be worth it to add when you go to sell, in other words, how much value will it add? If it were me, I would be leery to sink in too much money if I planned to move in seven years.

    I will let others weigh in on this. My parting advice is to consult with a real estate agent to if the improvement you are talking about will increase the value of your home enough to make worthwhile.
     
  19. Abner

    Abner Active Member

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    I never thought I would say, but thank you Newt! :smile:
     
  20. Johann

    Johann Active Member

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    Yeah - that's because it is. Really. I know the feeling. It's just starting, for you. Wait till you hit 70+! :smile:

    J.
     
    Last edited by a moderator: Oct 2, 2017

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