what does this mean? (read quote)
"If your mortgage payment is $900 and the interest portion is $830, you will pay that year around $10,000 in interest. What a great tax deduction! Right? Otherwise, you'd pay $3,000 in taxes on that $10,000. But who in their right mind would chose to trade $10,000 for $3,000?" -dave ramsey
can someone explain or clarify how that works?
Two Words: "Tian Xia"
~ Hero - Yimou Zhang, Jet Li, Tony Leung, Maggie Cheung, Donnie Yen, Daoming Chen, Ziyi Zhang
You can deduct the amount of interest you pay on your home loan from your federal income tax. The guy is questioning why you would keep paying on a loan you can pay off to deduct the amount of interest from your taxes when it costs you $10,000 a year to save $3,000. The practice is pretty common for people who have nearly paid off their home and could aford to write on final check and be done with it. Often times they simply keep paying the monthly payment and deduct the interest from their income taxes at the end of the year.
Well, it depends on how your taxes vs income breaks down, If that little bit more of duduction drops your final tax bill down a bracket, it may well behoove you to take it, and not pay it off this year. That is also why some people choose to pay off their prperty tax, or even januaries mtg payment in december, in order to drop a bracket.
Mayneed too see accountant 5o be certain.