Easiest way to cheat on your taxes?

[Captain Morgan]

http://finance.yahoo.com/news/what%E2%80%99s-the-easiest-way-to-cheat-on-your-taxes-.html

Here's one of my biggest problems with the article:

"The mortgage-interest deduction, which lets people deduct the interest they pay on their mortgages, requires the government to essentially write an annual check to everyone with a mortgage".

So freaking ignorant. Let's say you're in the 25% tax bracket. You only get to deduct the INTEREST from your mortgage. Let's say the interest is $10,000 per year. You only save 25% of that which means you've just paid the bank $10,000 in interest to avoid giving the government $2,500. Does that really make sense? Some states also give a property tax deduction for having a mortgage, but that deduction isn't going to be $7,500. Any accountant who tells you to take out a mortgage for a tax deduction is an idiot and you should find another accountant. The mortgage interest deduction only helps the banks make more money because people are freaking idiots and think they're actually getting something out of this.

[shmike]

Good explanation, Cap'n.

Every year around tax time I realize how few people have any understanding of how the most simple things work.

[tommymac]

funny you mention that. We had an 'accountant" who did our/my taxes a few yrs ago and told me I owed up to 15k dollars. His advice was to have kids and buy either another or a more expensive house. He was promptly told to fuck off and have since found a much better accountant.

I dont think a lot of people get a mortgage for a tax break but more so because they dont have the money to buy a house outright. I just look at the interest as another thing I can deduct, but still plan on paying it off as fast as I can so I dont have to pay all this intrest.

[fasternyou929]

Good explanation, Cap'n.

Every year around tax time I realize how few people have any understanding of how the most simple things work.

I heard another "so-and-so got a raise that put him in a higher tax bracket, so he would have been better off without it" story this week. :lol:

[anthonyk]

I don't see how the article is ignorant (or incorrect). :idk: Everything they said was totally true.

And taking out a mortgage instead of renting can save some money, assuming you don't get all caught up in pre qualifications and whatnot. If you can get your mortgage payment (including insurance, property tax, etc.) down to what you would have paid in rent, you're gonna save some money at tax time. Especially in those first few years where you're practically paying all interest.

Sure, buying a second house to reduce your taxes is a stupid idea, but it doesn't seem like that's what this article was suggesting.

[Sean]

You're building equity instead of paying rent. Assuming your payments are the same, it is a net gain.

[shmike]

You're building equity instead of paying rent. Assuming your payments are the same, it is a net gain.

Sometimes.

You have to assume that your equity builds faster than the markets erode prices. :lol:

Also, interest only loans qualify for the interest deduction with no equity building component.

[Krabill]

I got divorced last year and loosing the deductions from being married bumped me up a tax bracket. I went from my usual $4k refund to owing $1k, so I am actually paying $5k more in taxes because of it . . . and I'm still paying the mortgage on the old house . . . and rent for my new place . . . and child support . . . and alimony . . . and even after all that I still have more money left over than I did when my (ex) wife was spending all of my money :lol

[tommymac]

having kids is useful at tax time I am finding out. last few years I have been getting about 1200 back and thats with estimated payments, this year I got over 6, but thats filing jointly withthe wife. baby #2 in june so thats 2 deductions for this year.

[Gas Man]

Sometimes.

You have to assume that your equity builds faster than the markets erode prices. :lol:

Also, interest only loans qualify for the interest deduction with no equity building component.
Yeah I lost $35k on my condo when I moved.... to get into my current house and over the last 5 years the house has sunk about 30% in value regardless that I've refinished the kitchen & 2 bathrooms, resided, and a bunch more improvements... I can only hope that the market recovers 15% while I pay it down 15%...

My investment/accountant guy always tells me to owe taxes at the end of the year... don't let the feds borrow my money cause they don't pay interest.

[shmike]

I got divorced last year and loosing the deductions from being married bumped me up a tax bracket. I went from my usual $4k refund to owing $1k, so I am actually paying $5k more in taxes because of it . . . and I'm still paying the mortgage on the old house . . . and rent for my new place . . . and child support . . . and alimony . . . and even after all that I still have more money left over than I did when my (ex) wife was spending all of my money :lol

Ouch.

Freedom isn't free. :lol:

[Homeslice]

"The mortgage-interest deduction, which lets people deduct the interest they pay on their mortgages, requires the government to essentially write an annual check to everyone with a mortgage".
A correct statement :shrug:

[pauldun170]

"The mortgage-interest deduction, which lets people deduct the interest they pay on their mortgages, requires the government to essentially write an annual check to everyone with a mortgage".

I write a check to the government $33,000.
(Well I don't actually have to write a check. They just take it out of my paycheck)

I write another check to the state government for $7000. Its for use of state land (also known as real estate taxes)

I fill out a bunch of forms in the first quarter each year to make sure I've paid up all my bills to the federal government.

On a couple of items, the government throws in some freebies.
A package deal if you will. Buy one get one free kinda of stuff.

Government says if you do certain things we'll cut you a break.
On of those things is financing a home.
Government says...dont sweat the interest you pay on your mortgage because the bank is already paying taxes on that amount and we like people buying houses.


I say ok sweet deal.


On the interwebz "OMG they are giving those homeowners money!!!"


um no they are not.

[Homeslice]

On the interwebz "OMG they are giving those homeowners money!!!"


um no they are not.


Giving them money, refunding them money......same thing really. Why? Because if they wanted to, they could eliminate that deduction, and you couldn't do shit about it. Lulz

[Papa_Complex]

Giving them money, refunding them money......same thing really. Why? Because if they wanted to, they could eliminate that deduction, and you couldn't do shit about it. Lulz

On the one hand, you have people saying that the government is giving you money.

On the other hand, you have people saying that the government is giving you back a percentage of a percentage, of money that they already took from you.

Seriously, which is the more likely scenario?

[Homeslice]

On the other hand, you have people saying that the government is giving you back a percentage of a percentage, of money that they already took from you.


True, if one believes that ALL taxes are the same and should be lumped together for the purposes of this conversation.

But, some taxes are federal and some aren't. For example, property taxes aren't federal.

If anything, this deduction should be on a state level, not federal. Think about it this way. If I live in an expensive state like NY or CA, and my mortgage principal is $750K, I'm getting a pretty decent deduction from the feds --- Which is being taken out of ALL taxpayer's pockets, across the country. How does that make sense? Why not have each state manage it themselves, instead of forcing people in Mississippi to partially subsidize the deductions of people in CA?

[Papa_Complex]

True, if one believes that ALL taxes are the same and should be lumped together for the purposes of this conversation.

But, some taxes are federal and some aren't. For example, property taxes aren't federal.

If anything, this deduction should be on a state level, not federal. Think about it this way. If I live in an expensive state like NY or CA, and my mortgage principal is $750K, I'm getting a pretty decent deduction from the feds --- Which is being taken out of ALL taxpayer's pockets, across the country. How does that make sense? Why not have each state manage it themselves, instead of forcing people in Mississippi to partially subsidize the deductions of people in CA?

For the purposes of this conversation, it's all the same; the government giving you back a fraction of your own money.

From a standpoint of which level of government should be doing it, I would say that you're right. It would make more sense as a tool to drive the local economy, via State government, rather than coming from the Federal level.

[LeeNetworX]

Internet: Chock full of legal and financial genius.

[Particle Man]

funny you mention that. We had an 'accountant" who did our/my taxes a few yrs ago and told me I owed up to 15k dollars. His advice was to have kids and buy either another or a more expensive house. He was promptly told to fuck off and have since found a much better accountant.

Same here. Went to three different accountants before we found one who wouldn't spout that load of garbage.