*spinoff thread* From Frugal Nurses' paying off your mortgage thread. Tax Deductions

[PrairieRose]

I just wanted to elaborate for moment....humor me please

Frugal Nurse's post about paying off your mortgage (thanks for that one b.t.w. FN) made me want to make this point. She mentioned that her brother got really angry and tried to talk her down from making the mistake of paying off her mortgage. One point he tried to make was that of the illustrious tax deduction that you get for having a home mortgage. Well we all know that you do in fact get a deduction for it but have you ever considered how much (or how little) it actually is? Whatever the amount of the deduction you get on your taxes is relative to the tax bracket you are in. If you get a $1000. deduction (of any kind....not just talking mortgage interest here) and you're in the 15% tax bracket then you only get a savings of $150. Everyone thinks that b/c you get the $1000. deduction that you've saved $1000. The deduction or reduces your taxable income by the deductible amount. So many of us are not savvy to this fact, I just wanted to clarify. Take your interest deduction from last year and divide it by your tax bracket, this equals your true savings on the deduction. Now, would you rather have a free and clear home or deduct that amount from your taxes? Is it as much as you paid in interest or your mortgage? Why would we want to pay in $1000. in interest to a bank somewhere to save $150? I'd rather have my money in a mutual fund earning 10%, compounding, wouldn't you?

[Russ]

I can't tell you the number of times I talked with my dad about this. He was so against paying off a house it made me angry talking to him about it.

[PrairieRose]

I can't tell you the number of times I talked with my dad about this. He was so against paying off a house it made me angry talking to him about it.

My dh (Gripey) was against it too in the beginning.....now he expresses his gratitude almost daily about being debt free. It's amazing the amount of control we hand over where our minds are concerned (esp. regarding debt), isn't it? Makes ya wonder what else we're being 'controlled' by.....

[frugalfriend]

Love your signature, PrairieRose! Can't ya just hear Dave yell, freeeeeeeedom!!!!

[PrairieRose]

Love your signature, PrairieRose! Can't ya just hear Dave yell, freeeeeeeedom!!!!

Yes, yes I can

[mombottoo]

Which is exactly why we paid off our house when hubby got his settlement...many we know thought we were nuts...but, we've owned our house free & clear now for 7 years (well all except the property taxes...renting from the government). I wouldn't do it differently either, I like knowing we own our home.

[kmeyrick]

Nothing at all can match the freedom that comes with being debt free. I sincerely believe that.

[FrugalMomof3]

I agree with you, I know pretty much about the deductions and it never works how most think it does... I cant wait for the day to be mortgage free, a stinky measly tax deduction isn't worth it at all (the deduction that is)... the interest your saving from NOT having a mortgage payment in the first place and saving that extra money is worth TONS more.

[Michelle]

I can't wait to be able to pay ours off either. I liked the tax deduction in the beginning when our payments were mostly interest, but now that we've been here for 10 yrs, the deduction just isn't worth it any more.

[larabelle]

Thanks..for explaining the whole thing in simple terms that me and DD could understand. I can not wait to be debt free!!

[Michelle68]

Our goal is to have ours paid off in 6-7 years. DH and I are looking forward to that day.


--Michelle