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#17
11-23-2004, 05:37 PM
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 Re: mortgage interest "Barry Margolin" <barmar[at]alum.mit.edu> wrote: - quote - > "David Woods, EA, ChFC, CLU" <dwoods[at]woods-financial.com> wrote:
The discussion is about February's bill.> > "Seth Breidbart" <sethb[at]panix.com> wrote: > > > Gene E. Utterback, EA <eagent[at]alliancetax.com> wrote: > > > > I have never understood WHY anyone would to do this. Why > > > > would you want to pay more interest than you have too? The > > > > best you do is to recoup PART of what you pay in interest. > > > > Even in the highest tax bracket you only a portion of what > > > > you pay in interest. If you were in the 40% bracket, which > > > > doesn't exist any more, and you paid $1,000 in interest, > > > > you'd save $400. Essentially, you pay $600 to save $400. > > > > What about this makes sense to anyone? > > > If I pay $1000 in interest in December instead of February, > > > I get the $400 deduction this year instead of next. > > If you pay interest that hasn't been accrued, it's called > > principal. > He's paying his January mortgage bill, which includes > interest. -- David M. Woods, EA, ChFC, CLU Woods Financial Services Norwood, MA 02062 www.woods-financial.com << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#16
11-22-2004, 02:01 AM
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| Re: mortgage interest "David Woods, EA, ChFC, CLU" <dwoods[at]woods-financial.com> wrote: - quote - > "Seth Breidbart" <sethb[at]panix.com> wrote:
He's paying his January mortgage bill, which includes> > Gene E. Utterback, EA <eagent[at]alliancetax.com> wrote: > > > I have never understood WHY anyone would to do this. Why > > > would you want to pay more interest than you have too? The > > > best you do is to recoup PART of what you pay in interest. > > > Even in the highest tax bracket you only a portion of what > > > you pay in interest. If you were in the 40% bracket, which > > > doesn't exist any more, and you paid $1,000 in interest, > > > you'd save $400. Essentially, you pay $600 to save $400. > > > What about this makes sense to anyone? > > If I pay $1000 in interest in December instead of February, > > I get the $400 deduction this year instead of next. > If you pay interest that hasn't been accrued, it's called > principal. interest. -- Barry Margolin, barmar[at]alum.mit.edu Arlington, MA << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#15
11-22-2004, 02:01 AM
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| Re: mortgage interest David Woods, EA, ChFC, CLU <dwoods[at]woods-financial.com> wrote: - quote - > "Seth Breidbart" <sethb[at]panix.com> wrote:
That isn't what the documentation on my mortgage says. I> > If I pay $1000 in interest in December instead of February, > > I get the $400 deduction this year instead of next. > If you pay interest that hasn't been accrued, it's called > principal. have to label a payment "excess principal" in order for it to be principal. Seth << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#14
11-22-2004, 02:01 AM
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| Re: mortgage interest [pay $1000 interest this year instead of next] - quote - > > If I pay $1000 in interest in December instead of February,
Sorry, yes.> > I get the $400 deduction this year instead of next. > Do you mean a $400 tax reduction rather than deduction? - quote - > > One year's interest on $400 exceeds 1/6 year's interest on
That's assuming I have a spare $1000 to put into the debt> > $1000. > Ok. But if you use that $1000 to pay down principal rather > than to pre-pay interest, you won't save anything this year > but in the end you will end up saving one year's interest on > $1000 for each year there is left on the loan. And compound > interest at that. now, in return for saving lots more many years later (and actually being a little more out of pocket for the next few years, since less interest is being paid each year). Seth << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#13
11-18-2004, 02:54 AM
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| Re: mortgage interest "Seth Breidbart" <sethb[at]panix.com> wrote: - quote - > Gene E. Utterback, EA <eagent[at]alliancetax.com> wrote:
If you pay interest that hasn't been accrued, it's called> > I have never understood WHY anyone would to do this. Why > > would you want to pay more interest than you have too? The > > best you do is to recoup PART of what you pay in interest. > > Even in the highest tax bracket you only a portion of what > > you pay in interest. If you were in the 40% bracket, which > > doesn't exist any more, and you paid $1,000 in interest, > > you'd save $400. Essentially, you pay $600 to save $400. > > What about this makes sense to anyone? > If I pay $1000 in interest in December instead of February, > I get the $400 deduction this year instead of next. principal. -- David M. Woods, EA, ChFC, CLU Woods Financial Services Norwood, MA 02062 www.woods-financial.com << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#12
11-18-2004, 02:35 AM
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| Re: mortgage interest Seth Breidbart wrote: - quote - > Gene E. Utterback, EA <eagent[at]alliancetax.com> wrote:
Do you mean a $400 tax reduction rather than deduction?> > I have never understood WHY anyone would to do this. Why > > would you want to pay more interest than you have too? The > > best you do is to recoup PART of what you pay in interest. > > Even in the highest tax bracket you only a portion of what > > you pay in interest. If you were in the 40% bracket, which > > doesn't exist any more, and you paid $1,000 in interest, > > you'd save $400. Essentially, you pay $600 to save $400. > > What about this makes sense to anyone? > If I pay $1000 in interest in December instead of February, > I get the $400 deduction this year instead of next. - quote - > One year's interest on $400 exceeds 1/6 year's interest on
Ok. But if you use that $1000 to pay down principal rather> $1000. than to pre-pay interest, you won't save anything this year but in the end you will end up saving one year's interest on $1000 for each year there is left on the loan. And compound interest at that. Stu << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#11
11-17-2004, 04:50 AM
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| Re: mortgage interest Gene E. Utterback, EA <eagent[at]alliancetax.com> wrote: - quote - > I have never understood WHY anyone would to do this. Why
If I pay $1000 in interest in December instead of February,> would you want to pay more interest than you have too? The > best you do is to recoup PART of what you pay in interest. > Even in the highest tax bracket you only a portion of what > you pay in interest. If you were in the 40% bracket, which > doesn't exist any more, and you paid $1,000 in interest, > you'd save $400. Essentially, you pay $600 to save $400. > What about this makes sense to anyone? I get the $400 deduction this year instead of next. One year's interest on $400 exceeds 1/6 year's interest on $1000. I'm not losing the $1000, that's interest that I'm going to pay to the bank no matter what, the only question is when. Seth << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#10
11-13-2004, 03:45 AM
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| Re: mortgage interest Gene E. Utterback, EA wrote: - quote - > "curious" <corsica[at]ragingbull.com> wrote:
The real gain is the difference between what you give up by> > Can one prepay for a few months next year this > > year and take the mortgage interest deduction > > in their taxes for next year? > > > Is there a way to increase your mortgage payments. > > I have an ARM loan and was told I can only claim > > 13 months of mortgage interest payments in the tax > > bill. > > > Let me know...Thanks > The responses from A.G. Kalman, Mike Wing, Phil Marti & > David Woods are all good and on point. I will not repeat > what they have said. My response is more of a question and > observation - > I have never understood WHY anyone would to do this. Why > would you want to pay more interest than you have too? The > best you do is to recoup PART of what you pay in interest. > Even in the highest tax bracket you only a portion of what > you pay in interest. If you were in the 40% bracket, which > doesn't exist any more, and you paid $1,000 in interest, > you'd save $400. Essentially, you pay $600 to save $400. > What about this makes sense to anyone? making the payment 16 days early (12/31 vs 1/15) compared to what you gain by having the tax savings a year earlier. -- Alan http://taxtopics.net << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#9
11-13-2004, 03:45 AM
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| Re: mortgage interest Gene E. Utterback, EA wrote: - quote - > What about this makes sense to anyone?
IMHO it only makes sense if you are trying to lumpadditional deductions into a particular year (if, for example, you won't be able to itemize in the following year). But, every client that I've seen do this has ended up regretting it when they get to the end of the following year. <g MTW << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#8
11-13-2004, 03:26 AM
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| Re: mortgage interest Gene E. Utterback, EA wrote: - quote - > "curious" <corsica[at]ragingbull.com> wrote:
Well, yes.> > Can one prepay for a few months next year this > > year and take the mortgage interest deduction > > in their taxes for next year? > > > Is there a way to increase your mortgage payments. > > I have an ARM loan and was told I can only claim > > 13 months of mortgage interest payments in the tax > > bill. > > > Let me know...Thanks > The responses from A.G. Kalman, Mike Wing, Phil Marti & > David Woods are all good and on point. I will not repeat > what they have said. My response is more of a question and > observation - > I have never understood WHY anyone would to do this. Why > would you want to pay more interest than you have too? The > best you do is to recoup PART of what you pay in interest. > Even in the highest tax bracket you only a portion of what > you pay in interest. If you were in the 40% bracket, which > doesn't exist any more, and you paid $1,000 in interest, > you'd save $400. Essentially, you pay $600 to save $400. > What about this makes sense to anyone? If one knew that he would not be itemizing deductions in the subsequent year, might as well take the advantage of an extra payment (recognized by IRS) in the current tax year. ChEAr$, Harlan Lunsford, EA n LA "Tax planning, just like life, is a matter of timing." Fri, 12 Nov 2004 09:03:43 << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#7
11-13-2004, 03:07 AM
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| Re: mortgage interest "Gene E. Utterback, EA" <eagent[at]alliancetax.com> wrote: - quote - > I have never understood WHY anyone would to do this. Why
It's a timing issue.> would you want to pay more interest than you have too? The > best you do is to recoup PART of what you pay in interest. > Even in the highest tax bracket you only a portion of what > you pay in interest. If you were in the 40% bracket, which > doesn't exist any more, and you paid $1,000 in interest, > you'd save $400. Essentially, you pay $600 to save $400. > What about this makes sense to anyone? If you're in a high tax bracket this year, and expect to be in a lower tax bracket next year, you recoup more by paying the 13th month's interest this year. Also, any extra money you save this year can be put to work investing, and it will have more return over time. -- Barry Margolin, barmar[at]alum.mit.edu Arlington, MA << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#6
11-13-2004, 02:47 AM
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| Re: mortgage interest Gene E. Utterback, EA wrote: - quote - > "curious" <corsica[at]ragingbull.com> wrote:
Excellent point. Normally what people will do is to prepay> > Can one prepay for a few months next year this > > year and take the mortgage interest deduction > > in their taxes for next year? > I have never understood WHY anyone would to do this. Why > would you want to pay more interest than you have too? The > best you do is to recoup PART of what you pay in interest. > Even in the highest tax bracket you only a portion of what > you pay in interest. If you were in the 40% bracket, which > doesn't exist any more, and you paid $1,000 in interest, > you'd save $400. Essentially, you pay $600 to save $400. > What about this makes sense to anyone? part of the principal rather than interest. It's not deductible, but it will reduce the necessity to make some future interest payments, and could result in paying off a loan sooner than would otherwise be done. From that standpoint it's a money maker to do that. But it's effect is in the long term, not because of a current tax deduction. Stu << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#5
11-13-2004, 02:47 AM
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| Re: mortgage interest Gene E. Utterback, EA wrote: - quote - > The responses from A.G. Kalman, Mike Wing, Phil Marti &
You are correct. The only reason to do this is if you are> David Woods are all good and on point. I will not repeat > what they have said. My response is more of a question and > observation - > I have never understood WHY anyone would to do this. Why > would you want to pay more interest than you have too? The > best you do is to recoup PART of what you pay in interest. > Even in the highest tax bracket you only a portion of what > you pay in interest. If you were in the 40% bracket, which > doesn't exist any more, and you paid $1,000 in interest, > you'd save $400. Essentially, you pay $600 to save $400. > What about this makes sense to anyone? in business for yourself and you want to stay ahead because you remember what it was like when the wolf was at the door. Dick << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#4
11-12-2004, 07:16 AM
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| Re: mortgage interest "curious" <corsica[at]ragingbull.com> wrote: - quote - > Can one prepay for a few months next year this
The responses from A.G. Kalman, Mike Wing, Phil Marti &> year and take the mortgage interest deduction > in their taxes for next year? > Is there a way to increase your mortgage payments. > I have an ARM loan and was told I can only claim > 13 months of mortgage interest payments in the tax > bill. > Let me know...Thanks David Woods are all good and on point. I will not repeat what they have said. My response is more of a question and observation - I have never understood WHY anyone would to do this. Why would you want to pay more interest than you have too? The best you do is to recoup PART of what you pay in interest. Even in the highest tax bracket you only a portion of what you pay in interest. If you were in the 40% bracket, which doesn't exist any more, and you paid $1,000 in interest, you'd save $400. Essentially, you pay $600 to save $400. What about this makes sense to anyone? Gene E. Utterback, EA << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#3
11-08-2004, 10:33 PM
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| Re: mortgage interest Phil Marti wrote: - quote - > Interest must accrue before you can deduct it.
It might be worth pointing out here that mortgage interest> You can make your January payment in December and have 13 > months of deduction for this year. is normally paid "in arrears," meaning that your January payment pays the interest that accrued in December. That's why prepaying a mortgage has, at best, a ONE MONTH advantage. MTW << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#2
11-08-2004, 10:14 PM
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| Re: mortgage interest urious wrote: - quote - > Can one prepay for a few months next year this
Prepaid interest is not deductible. Therefore, the most you> year and take the mortgage interest deduction > in their taxes for next year? > Is there a way to increase your mortgage payments. > I have an ARM loan and was told I can only claim > 13 months of mortgage interest payments in the tax > bill. > Let me know...Thanks can deduct in any year is 13 months. You can accomplish this by making your January payment in December. You are allowed to do this because mortgage interest payments are made in arrears. You won't be able to repeat the 13 month scenario until such time that you only make 11 payments in one year. -- Alan http://taxtopics.net << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#1
11-07-2004, 12:57 AM
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| Re: mortgage interest corsica[at]ragingbull.com (curious) writes: - quote - > Can one prepay for a few months next year this
No. Interest must accrue before you can deduct it.> year and take the mortgage interest deduction > in their taxes for next year? You can make your January payment in December and have 13 months of deduction for this year. That leaves you with 11 months of deduction next year unless you do the same thing. If you're itemizing only every other year, this approach would make sense. Phil Marti Clarksburg, MD << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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11-07-2004, 12:19 AM
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| Re: mortgage interest "curious" <corsica[at]ragingbull.com> wrote: - quote - > Can one prepay for a few months next year this
By definition, if you prepay on a loan, you are paying> year and take the mortgage interest deduction > in their taxes for next year? > Is there a way to increase your mortgage payments. > I have an ARM loan and was told I can only claim > 13 months of mortgage interest payments in the tax > bill. > Let me know...Thanks principal not interest. -- David M. Woods, EA, ChFC, CLU Woods Financial Services Norwood, MA 02062 www.woods-financial.com << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#-1
11-05-2004, 09:00 AM
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| mortgage interest Can one prepay for a few months next year this year and take the mortgage interest deduction in their taxes for next year? Is there a way to increase your mortgage payments. I have an ARM loan and was told I can only claim 13 months of mortgage interest payments in the tax bill. Let me know...Thanks << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
| Tags |
| interest, mortgage |
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