Home Mortgage

We all want to pay less taxes…at least I do. So often people keep their home mortgage tax write off, even when it could be paid off.

In case you are not aware of how this works, I'll explain it to you. When you pay your taxes at the end of the year the amount you paid in interest toward your house is deducted from your income before your taxes are calculated.

According to the government the interest you paid on your home mortgage is not counted as income.

Unfortunately this tax break is really costing you money!

It’s simple math. Depending on your tax bracket for every dollar you spend in interest toward your mortgage you don’t pay $0.25 to $0.35 in taxes.

We are going to say you are in the 25% tax bracket. So if you pay $1000 in interest you don’t pay $250 in taxes. But what if you didn’t have a home mortgage? What if your home was paid off completely?

You would have to pay $250 in taxes. But the extra $750 goes into your pocket. It’s yours!

The bank no longer owns your home, you do. You paid less in interest because you paid off your home mortgage faster and now you have more money.

But maybe that extra money you were paying in interest helped you stay in a lower tax bracket and now that your home is paid off you are in a higher tax bracket and so you have less of the money than you thought you would?

Or what if you invest that money in some way and the realized gains are taxed heavily?

These tax concerns are real and they can drain your family’s money. This is a big reason why people just buy into the myth that if I keep paying on my home and get that tax write off it will be better and easier.

Granted it may be easier math wise. But if you stick with this system there will be much less dollars in your account. Let’s take another approach let’s say you pay off your home, and invest your money in some short term investment. Maybe you do some quick real estate transactions or play in the stock market and you realize your gains. All of a sudden taxes that you didn’t anticipate may blind side you come next April.

A little planning can go a long way. If you are serious about getting out of debt and becoming financially free it is worth your time and money, once you are out of debt, to visit with a great accountant or lawyer that can set you up with some sort of tax shelter.

These tax concerns are real and they can drain your family’s money. This is a big reason why people just buy into the myth that if I keep paying on my home and get that tax write off it will be better and easier.

Granted it may be easier math wise. But if you stick with this system there will be much less dollars in your account. Let’s take another approach let’s say you pay off your home, and invest your money in some short term investment. Maybe you do some quick real estate transactions or play in the stock market and you realize your gains. All of a sudden taxes that you didn’t anticipate may blind side you come next April.

A little planning can go a long way. If you are serious about getting out of debt and becoming financially free it is worth your time and money, once you are out of debt, to visit with a great accountant or lawyer that can set you up with some sort of tax shelter.

All this means is that you organize some sort of business. Then you can have all kinds of tax write-offs.

There are whole books, and libraries written about taxes and corporations and blah, blah, blah. It’s can get hairy and somewhat boring. Except the saving money part, that perks my interest.

My point is simply that paying off your home mortgage is a good financial decision. And when it comes time to worry about not having one of the tax write-offs you used to have there are options, legal options, that will help you continue to pay less taxes and then you can build your wealth for you and your family.

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"A man in debt is so far a slave,"
Ralph Waldo Emerson.


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