Re: Mortgage Intrest Tax Writeoff ?
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If you pay $10,000 in interest, you get to write $10,000 of your income. The value of that write-off is $10,000 x your marginal rate, probably 25%, plus any state taxes you may eliminate, but for simplicity, let's say it's worth $2500 in less taxes. Unless you've got a whopping mortgage, it's that simple.
Now, why would you want to carry a mortgage vs. not carrying one? It's all about opportunity cost. To have to pay $10000 in interest, let's say you're carrying a $200,000 mortgage at 5%. The choice is to have or not have the mortgage. With the tax deduction, your effective interest rate is 3.75%. Can you find an investment that pays, after taxes, better than 3.75%? Credit cards payoff, stocks, college funds, retirement accounts, other real estate, etc. Lots of possibilities. It all depends on what you will do with the money. (I'll leave out the appreciation of your house, because it will appreciate the same regardless of whether or not you have a mortgage. Appreciation of a second property is a different matter.) [/quote
If I paid $10,000.00 in intrest I only get a tax benefit of $ 2,500.00 ? Why would I not pay off my house if I had the money in the bank ? Also why do people always say "it's a tax write off" ?
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