Quote:
Originally Posted by pilotbob
As far as the "tax deduction" loss. This is just a misnomer perpertuated by the mortgage industry. You get about 30% back of your interest payments off your taxes. But, remember, paying interest is like GIVING the bank money.
If anyone wants to send me AS MUCH of your money as you want. For every $ you send me I PROMISE to send you 30¢ back on April 15th of the next year. Hmm... doesn't sound like such a nice deal any more does it???
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It's actually worse than that. Let's say you pay $30K in interest for the year. First, you subtract the standard deduction of about $10 (since most people don't really have any other deductions that get them close to that). Now you only have $20K to deduct. Even at the highest rate of 28%, you only get that "back" on the 20K, not the entire amount. For this particular person, it's 18% back (and that's with both a high interest amount and an assumption that all the deduction is in the highest tax bracket). In the meantime, the govt charges the business taxes on the entire amount (the states pretty much look at gross income, although fed taxes are more on "net"). Those in states with income taxes may get to deduct it there, but not all do (and not all states have an income tax). The deduction can be a bonus for some, but should never enter into your calculations on whether a loan is a good deal or whether or not you can afford it. You especially should not depend on getting that "return." Look at CA - they have suspended income tax return checks for the time being. There is no guarantee the deduction will remain in the future, as well.