Law Articles And Legal Issues

Home Loans and Mortgages – The Myth of Tax Deductible Interest

Home ownership has risen sharply in recent years, and the percentage of Americans who own their own homes is approaching a record seventy percent. That's a good thing; we'd all rather live in our own home than consider the alternatives. The most common method of purchasing a home is by taking out a mortgage. Mortgage types vary, but most loans consist of some variation of a thirty-year loan, with interest applied to the purchase price. This added interest can easily cause the total sum paid to be double or triple the actual purchase price of the home. This is an unavoidable cost of borrowing a large sum of money over a long period of time, but it still causes alarm at closing time when the borrower realizes that his or her $150,000 home will cost a half million dollars by the time the loan is paid off. At this point, the lender usually points out that the interest is tax deductible, and the borrower offers a sigh of relief. Is the deductibility of the interest really that big of a deal? Does anyone really benefit from it?

Without question, the best way to pay for a home is to pay cash. It's the cheapest way to buy a home and once you pay for it, you are done. Few Americans are in a position to do so, however. Homes are expensive. And depending on economic conditions, it may actually be cheaper to take out a loan than to pay cash. If you could borrow money for thirty years at six percent and invest money at ten percent, you'd be better off borrowing and investing instead of paying cash. But lenders and others who mean well often mention that tax deduction as though it should be a deciding factor in how a home is purchased.

The interest on a primary residence is deductible on loans of up to one million dollars. That means that the amount of interest paid in a calendar year can be deducted from taxable income, effectively reducing the amount of income tax paid. More often than not, this turns out to be of little benefit to taxpayers. It's not as though the Government is paying your interest. For the typical American taxpayer who pays in the 28% tax bracket, the deduction amounts to a rebate of twenty eight cents for every dollar paid in interest. Complicating matters is the fact that this is only true for that portion of the interest that exceeds the standard deduction allowed for every taxpayer that files. That deduction, currently $10,000 per married couple, is usually greater than the amount of mortgage interest most couples pay during the year. What this means is that many, if not most, Americans derive no tax benefit from their mortgage interest whatsoever.

Of course, homeowners who pay more than 28% of their income in taxes or those who own homes with large mortgages can benefit more from the tax deduction. Most American homeowners, on the other hand, get nothing from it. The tax deduction isn't entirely insignificant, but it shouldn't be a deciding factor in determining how to pay for a home. Prospective buyers should realize that while the deduction is a potential perk of taking out a mortgage, the likely tax benefit from it ranges from "very small" to "nothing at all."

©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including HomeEquityHelp.com, a site devoted to information regarding mortgages and home equity loans.

Other Article Sites

findabook.com  moneycd.info  a-mortgage.info   about-lemon-laws.info  aboutstudentloans.info
all-about-publishing.info  auctions-articles.info  bestcollege-university.com  bestispconnection.com
biblefolder.com  blogger-website.com  books-used.info  brokers-guide.info  buywindows.info  cable-dsl.info
career-miner.com  carpel-tunnel.info  cashinaflash.info  cashloanreviews.info  casinobell.com  chat-house.info
clearmycredit.info  collegeloantips.info  crones.info  depression-articles.info   dirnic.net  dishguides.info
divers-below.com  expodog.info   financewizz.com  fire-insurance.info  getgood.info  handleit.net   it-idea.info
health-supplies.info  hosting-right.com  insidealert.com  insurance-facts.info  jobs-employment.info
justgood.info  lookgold.net   lowcost-travel.info  money-source.info  myhostzone.info  numisblog.com
peoplesearchfinder.info  pr-articles.info  realeas.com   refinancing-guides.info  spyware-remove.info
telelot.info  the-law.info   toppaid.info  travel-deals.info  travelcorrect.com  wedding-guide-site.com
your-blog.info  your-credit.info

Other Law Sites
Search The Internet For Other Law Sites

Law Books
Search For Law Books At FindaBook.com

How To Know Your Legal Rights In The Event Of A Personal Injury
In the event of an injury, you need to know that you have rights and that your rights will be protected Personal injury is one of the leading causes of people getting hurt in the Country today

Why You Need a Durable Power of Attorney Now!
Planning for unfortunate events such as serious illness or injury is rarely on anyone's list of favorite pastimes. Sometimes, though, enduring the small discomfort that may accompany preparing for the unexpected will avoid untold anguish on the part of your family and friends.

Fen-Phen Settlement Lawyer: Lawsuit Facts
Fen Phen was used as a diet drug for many years. It is a combination of two drugs, fenfluamine and phentermine.

Locating Tax Lien Properties
Tax lien auctions may not take place in secret under the cover of night, but the fact is that most people who have never attended such an event are completely unsure of where to find one. Many counties hold just one annual tax lien auction. And some counties don't offer them at all, so you may need to do a little traveling. To find a tax lien auction, visit neighboring county websites, where you'll find dates and inventories. The next step is to undergo the registration process, which is necessary in order to participate. When making your reservation, inquire about any fees involved. Registration fees are not commonly enforced but you wouldn't want to be caught off guard when you arrive at the auction without the necessary funds to pay a f...

Roni Deutch Nominates Managing Attorney Justin Hein for Prestigious IRS Committee
Roni Deutch, known as The Tax Lady, has nominated managing attorney Justin Hein to a seat on the IRS' private-sector advisory panel. Hein hopes to be considered as he looks forward to providing the IRS feedback on tax administration.

Finding Virginia's Best Social Security Lawyer
Social Security Disability Practice is a specialized field of law. If you needed brain surgery you would not go to a general practitioner. Similarly, if you need Social Security Disability you should go to a specialist. These are tips for finding a good one:

The Essence of Employment Law
We work to live; we do not live to work.

Study: Audio, Web, Video Conferencing Looms Large in Finance, Banking, Legal, Insurance and Real Estate Markets
First of industry reports on audio, web, video conferencing shows users in finance, banking, legal, insurance and real estate markets would rather audio conference than meet face-to-face

Responsible Parents: The Legal Approach To Raising Children
Being a parent can be a wonderfully rewarding experience. However, often parents will face difficult circumstances such as divorce or separation that may detract from attending to the full responsibilities and duties towards a child according to law. At LAC lawyers, we can provide a clear guide as to your full rights and responsibilities as a parent under the family law system.

Passing of New Law Targets Nevada Businesses Hiring Illegal Workers
A recent law was passed in Las Vegas, directly affecting businesses that hire illegal immigrants. Resources like ImmigrationLawHelp.info are assisting those businesses affected by Assembly Bill 383, which cracks down on their hiring, with information and alternative solutions.

Roni Deutch Tax Center® Hosts First Annual Franchise Convention
Roni Deutch Tax Center celebrates their first annual convention at the Grand Sierra Resort in Reno, Nevada. The convention lasts for three days and includes informative lectures and training sessions ending with a formal gala event.

How to Remove DRM from WMA - Is It Legal and Worth the Effort?
Technically, it's illegal to remove DRM from WMA protected music. Digital Rights Management (DRM) is part of the music industry's effort to curb piracy.

"Law Of Attraction And Quantum Physics"
The Law of Attraction (http://www.supersonicsuccess.com/lawofattraction.html) can be clarified with the help of Quantum Physics (http://www.supersonicsuccess.com/lawofattraction.html). This can be used to explain the details in a systematic way. Atoms are not actually made up of elements, according to Quantum Physics.

First Ever Report on Tax Stamp and Banderol Market Published
Reconnaissance International has published the first ever detailed study on tax stamps and banderols around the world. Tax stamps - which function as both a record of payments and a barrier to counterfeiting - are being used by nearly 80 revenue authorities to authenticate and track tobacco and alcohol products, and to secure the valuable revenue derived from customs and excise duty on these products. 136 billion stamps are now produced annually, outnumbering banknotes as the most numerous security printed item in the world. The 100 page report describes the drivers for their rapid growth, the technologies involved, how they work and who supplies them .For more information, and to order a copy, please visit here ( Develop Your Domain Names | Site Map | Home