blacksc400

iTrader: (4)

Every state has its own tax code, we can discuss the general idea of writing off business expense, but yes, please consult with a good accountant ( you should already have one if you are in business for awhile ), before practicing any of business deductions.

Oldfart

I am a CPA and do taxes for many businesses and I am so glad I found this website. This is the best place to get very accurate tax advice.

I once got a call from a prospective client who was a sole owner of S corp. (Yes there is a difference how you calculate your tax based on % of ownership.) and I told him that he was doing his taxes wrong. He said that he was doing it all the time and never heard from IRS. I said I drive 80MPH on freeway all the time does it make it legal because I never was caught?

SW17LS

If the poster didn't file a schedule c, we would not be discussing their ability to write a vehicle off as a business expense. You can do so as a W2 employee in some situations also, but typically when we're talking about that we're talking about somebody who files a schedule c. Of course one should always discuss with a tax professional.

As for any comprehensive tax reform from Trump, I wouldn't hold my breath.

situman

This should be changed to "Did you deduct your leases against taxes legally"

SW17LS

Yes I did.

mmarshall

As I see it, apples and oranges. Doing one's taxes, though, in what is not the most efficient way is not necessarily illegal, even if it means a lower refund or a higher tax bill...it depends on whether any actual IRS codes were broken, or if there is a deliberate attempt at fraud, tax evasion, or to conceal taxable income. Driving at 80 MPH, however, is clearly illegal in most places of the U.S., except maybe on a few stretches of Western Interstates.

Johnhav430

I don't know if I will eventually change...if I were to lighten up as far as spending, maybe I would lease, because I can't afford a 911 Carrera S, and am not ashamed to state that for the record. Actually, a guy in my office retired, and I said, hey Joe, you have a 911, right? He goes yes I do. I told him I once dreamed of them, but have given up. He said, and I quote, "It took me thirty years to get it. You still have a lot of time." Good guy.

Funny too with taxes, have always done it myself, about all I have is schedule Ds to worry about, and I even still mail my return hahahahahahahaha

Mailed on 4/6 this year, refund check in hand last Friday. Just bank it, nothing more. In PA, we have school taxes due 8/31, I use it to help pay that. What I do find interesting about the IRS is if you make a mistake and are due a refund from them, they pay interest back to your mistake? And you get a 1099 as well. That's pretty fair.

Truth be told, I think the sum total of my scrimping and saving is that the house would be paid off sooner than later, other than that, who knows what the real benefit is....

ragingf80

I've had this discussion in another forum about personal finance and retirement. Of course take this with a grain of salt since all of our situations are different, but generally paying off your house was the "old school" method. Today, that money you used to pay on top of your mortgage could have been working for you in a S&P500, IRA, etc etc. Reason being that your house won't appreciate more if you pay off more of the mortgage. If you have a low enough interest rate, you won't be saving anything as significant in paying early as opposed to investing, couple that with the fact that your mortgage interest is deductible. In a nutshell, compounding interest and reinvesting dividends in a fund might be more beneficial than paying off your mortgage early.

There are some good points here:

https://financialmentor.com/popular/...or-invest/7478

IMHO if this is NOT the home you will have until retirement, let your cheapest debt lie while you invest in higher long term returns elsewhere. It also brings about some interesting points how $1,000 saved in the future is only worth $375.12 today due to inflation and how your Mortgage is a leveraged play against inflation. Food for thought and way OT, sorry about that.

SW17LS

Yeah I have no interest in paying off my house until such time as I have no earned income to write the interest off of.

Johnhav430

Yep I hear you, I can actually pay off our house by selling some stock--now if the stocks got clipped 30%, I'd say why didn't I? And I know why, because we're at 3.37% and the interest is deductible, market should outperform that.....but I am seeing how old-fashioned it is, so what if my house is paid off, besides not having that monthly outflow....what if we (my wife and I) embrace the reverse mortgage generation? If this were 10 years ago, you fellas would have me banned from this thread based on what I thought about leasing.....but I find this thread informative....I know I could be done with 5-11 y.o. cars if we leased, and it would feel good to drive something new....I still keep hoping that by being conservative, maybe I can buy a Corvette or far-fetched 911 10 years after the son goes off to college? It's funny how some here are already, been there, done that! But again on the topic always purchased....the LS430 was the first time I paid cash for a non-junk car (2006 last Oct.)....

geko29

Not saying it's the case for you, but this is a commonly-held belief that's often (not always) based on faulty logic. Assuming for the sake of argument that the interest part of your mortgage payment is $10k/year and you're in the 28% tax bracket, the mortgage interest deduction does save you $2,800. But you still have to pay $10k to get that deduction, so $7,200 is just disappearing into thin air.

One has to be careful not to get too fixated on reducing taxes through all means possible--after all the ultimate way to reduce taxes is to stop earning money altogether. But that's cutting off your nose to spite your face. And, to a lesser extent, so is carrying a mortgage solely for the tax deduction. Specifically with regards to whether or not to carry a mortgage, the decision should be based on:
1) The risk-adjusted return of what you would otherwise do with the money used to pay off the mortgage, compared to the tax-adjusted cost of the monthly mortgage payment
2) The value of having a substantial bump in free cash flow, and what it would be used for.

For myself, this calculus wound up somewhere in the middle. I haven't paid my mortgage off, but did just refinance down from 27 years @ 3.85% to 15 years at 2.5%, which is 1.8% after accounting for taxes. This resulted in my payment going up about 50%, in exchange for eliminating nearly 70% of the total interest paid. I expect my investments to have a better return than 1.8% over term of the loan, so it makes little financial sense to pay it down further. But we do want it fully paid for prior to retirement, and the 15 year term will have it paid off by the time we're 55.

SW17LS

Thats an entirely different situation, I'm not carrying a mortgage solely for a tax deduction, I'm also carrying one because I'm earning a return on money that is borrowed at a low rate, and the money that I would use to pay off that mortgage is invested earning a higher return than it costs me to have that mortgage outstanding.

I view the mortgage interest deduction as simply a way to reduce the cost of that borrowed money when I compare it to what my cash is earning where its invested.

In my situation I'm not that close to retirement, and the home I currently own is not the home I will own long term in the future.

Johnhav430

I have heard people say don't put extra money to your mortgage, you will reduce your deductions. I think that's faulty, just like some say, "it's not worth it to work overtime, it costs too much in taxes." I expected my bonus to be taxed at 25%, which I believe is referred to as a supplemental rate. Instead, it was 35%. I will be the first to tell you I do not have an effective tax rate of 35%. And personally, I would have loved to have been taxed at 39.6%, just to brag about it. But the truth is my bonus was decent this year, and my employer used the aggregate method. This assumes that I earn that amount, times 26, which I do not. So essentially, too much tax was withheld from my bonus, and I'll get it back next year.

Just think of Canada, there is no mortgage deduction, yet they still own houses. And they don't have 30 yr. rates locked in, from what was explained to me. They do amortize over 30 years, but the rate is not guaranteed for that long....if this is not the case, then my in-laws are not good in explaining...

edit p.s. I did the first lien position 10 yr. loan twice, this is not technically a mortgage (it replaces it and takes the first lien position), but a home equity. If you already have a home equity, it must subordinate, or you can't do it. This means no title insurance, only a $68.50 county disposition fee, i.e. no break-even. The disadvantage is the rate is higher than a 15, but lower than a 30. So you can do this over and over if rates are falling, I did it twice. 6.5 yrs. left

SW17LS

My issue with putting extra money into your mortgage is that you're paying off a debt that has a very low effective interest rate, and that money will earn you better returns properly invested. Your home is already appreciating and you're using somebody else's money for the investment.

Toys4RJill

If you are self-employed, I believe you can deduct a portion of the mortgage interest.

Quote:Originally Posted by Johnhav430
Just think of Canada, there is no mortgage deduction, yet they still own houses. And they don't have 30 yr. rates locked in, from what was explained to me. They do amortize over 30 years, but the rate is not guaranteed for that long....if this is not the case, then my in-laws are not good in explaining...
In Canada, your primary home is not subject to capital gains taxes.
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