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Old 06-05-2014, 07:08 AM
 
Location: NYC
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The mortgage deduction is the largest deduction for most citizens, #2 would be business expenditures. My impression, & it has been a number of years since I have looked into this but I just paid off my mortgage last month so I will have revisit this to see if it still holds true, but it used to be that you merely had to have the intention of running/starting a business & not necessarily making a profit on it: office supplies, tech like printers or computers, home office, etc.,

The home office is certainly a red flag for the IRS & you would have to prove that it was used for business: meeting clients, etc., also things like amortization come into play. I recently also retired & now have tight fixed income. I am weighing the possibility of buying a heavy duty computer & pertinent software that would cost several thousand dollars against just not bothering. I wouldn't come out ahead $$ wise but I could get a break on costs associated with my experience if I decide to pursue some freelance work further down the road.
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Old 06-05-2014, 07:15 AM
 
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If it is possible to do in your state, you can pay current year property tax and last year's property tax in the same year if that will allow you to itemize. However the next year would probably mean taking the standard deduction.

As an example, In Texas I can pay 2013 property tax in Jan. 2014 and I can pay my 2014 property tax in Dec. 2014. I would be able to claim the total amount paid on Schedule A. This might allow me to Itemize above the standard deduction amount. However, in 2015 I wouldn't have paid any property tax and this might force me to take the standard deduction.
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Old 06-05-2014, 08:24 AM
 
Location: Edina, MN, USA
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I recently paid off my mortgage and will see how I'm affected tax wise this next year but~~the last several years I had a mortgage the amount toward mortgage interest was minimal at the end of the year. I use medical - just the premiums alone is a biggy plus I always have the license tabs for the car, home taxes, donations. I don't think I'll be affected that much.
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Old 06-05-2014, 12:21 PM
 
Location: SoCal desert
8,093 posts, read 13,242,460 times
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Quote:
Originally Posted by ABQ2015 View Post
If you are less than age 65, you can convert to a High Deductible Health Plan (HDHP) and then contribute to a Health Savings Account (HSA). As a single person, I can contribute about $4500 a year to my HSA and do not have to pay federal or state tax on it. So save about $1500 in taxes. I can invest the HSA money in a money market or in mutual funds and use the money to pay for future health costs. An HDHP is not recommended for those with significant health issues but was ok in my case.
OP - this is the only other thing I could think of also. But if you want to take money out for non-medical, the taxman will come after you with the usual taxes and penalties.

In my case, I never even looked into it since I have 'retired employee' medical/dental/vision insurance through my old employer.
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Old 06-05-2014, 01:22 PM
 
Location: Los Angeles area
14,018 posts, read 17,754,097 times
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To the OP: It appears your best bet may be a consultation with a CPA. So far none of us laymen have been able to come up with the magic bullet you are seeking.

There is an unstated premise in the way you phrased your thread title, namely that some of us "did" something tax-wise when we paid off our mortgage. After two and a half pages of responses, it appears there is not a whole lot which can be done, although we posters are not tax experts. I imagine what most of us "did" after paying off our mortgages is what I did: accept the fact that our income taxes would be slightly higher and go on down the road. What's the big deal?

Seek out a professional.
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Old 06-05-2014, 01:57 PM
 
3,682 posts, read 4,941,043 times
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Quote:
Originally Posted by Escort Rider View Post
To the OP: It appears your best bet may be a consultation with a CPA. So far none of us laymen have been able to come up with the magic bullet you are seeking.

There is an unstated premise in the way you phrased your thread title, namely that some of us "did" something tax-wise when we paid off our mortgage. After two and a half pages of responses, it appears there is not a whole lot which can be done, although we posters are not tax experts. I imagine what most of us "did" after paying off our mortgages is what I did: accept the fact that our income taxes would be slightly higher and go on down the road. What's the big deal?

Seek out a professional.
Good point, and thank you for your time and your response.
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Old 06-05-2014, 02:09 PM
 
48,516 posts, read 83,989,888 times
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yep last years of most mortgages the deduction reclines as interest mounts to less and less. I did tho start a health savings account even before mortgage was paid off. Its nice to have now that I am older to pay for both supplement cost and any other cost. Then with principal payments gone you can even accumulate much more in retirement savings during those years. Not much out there to really equal write off of mortgage interest especially in first half of it. But even then it frees a lot of money for most.
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Old 06-05-2014, 09:23 PM
GLS
 
1,985 posts, read 4,849,297 times
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Quote:
Originally Posted by Thinking-man View Post
So you couldn't find anything to offset it?
No, but I still work one day a month so I have considerable business deductions. These are actually more valuable to me since they reduce my self-employment tax as well as income tax. In addition, my mortgage rate was 4% and in the last few years the interest deduction was not significant.

The point of my original response post was to illustrate that the psychological benefit for ME PERSONALLY of owning a home free & clear was worth the tax trade-off.
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Old 06-05-2014, 09:52 PM
 
Location: Wisconsin
21,542 posts, read 44,060,337 times
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I had always done a lot of pre-retirement tax planning for many years BEFORE retiring. So, instead of paying off a mortgage, I diverted maximum amounts to tax-deferred IRAs, 401k and HSA. Those investments are earning close to 10%/yr, much higher than the amount of interest I pay on my current mortgage. I still benefit from any real estate appreciation, such as it is, without the cash investment (it's called leverage - pretty much why I've got what I've got).

Even if I take twice the RMD annually from those tax-deferred accounts, I'm still paying NO federal taxes whatsoever, nor state taxes, for that matter. Half of my residence is a rental (to son/dil). So, I can deduct 50% of property maintenance in addition to all of the mortgage interest and very high real estate taxes.

What I am planning to do next year is start increasing the withdrawals from the IRAs, doing Roth conversions incrementally, so that when the day comes the itemization comes to an end, my taxable income is similarly reduced.

Other option, I suppose, is double-up as suggested above on property taxes. Also, start buying tax-free investments instead of keeping money in taxable investments, although I'm no expert in that area, own no tax-frees, and probably never will.
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Old 06-05-2014, 10:09 PM
 
Location: Edina, MN, USA
6,954 posts, read 7,398,977 times
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Quote:
Originally Posted by GLS View Post
No, but I still work one day a month so I have considerable business deductions. These are actually more valuable to me since they reduce my self-employment tax as well as income tax. In addition, my mortgage rate was 4% and in the last few years the interest deduction was not significant.

The point of my original response post was to illustrate that the psychological benefit for ME PERSONALLY of owning a home free & clear was worth the tax trade-off.



Yes
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