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Old 06-04-2014, 08:55 AM
 
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Since the interest paid on mortgages is presumably a big chunk of tax write off, i'm wondering what some of you folks did to offset that 'loss of tax benefits' once your mortgage was paid off!

Aside from IRAs/401k/529 plan, what other methods did you use to lower your tax burden after finishing with the mortgage?

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Old 06-04-2014, 10:11 AM
 
Location: VT; previously MD & NJ
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When you get to the end of a mortgage, more goes to principal than interest. So your interest deduction goes down over the life of the mortgage.

In my case, the monthly mortgage payment I no longer need to make amounts to much more than any tax savings I was getting in previous years when I deducted interest.

After mortgage, you still get to deduct your real estate taxes, which may or may not be enough to let you itemize.

If you retire before eligible for medicare, you can deduct medical expenses, including insurance premiums. That plus real estate taxes may be enough to let you itemize.
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Old 06-04-2014, 10:43 AM
 
3,673 posts, read 4,937,285 times
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Quote:
Originally Posted by ansible90 View Post
When you get to the end of a mortgage, more goes to principal than interest. So your interest deduction goes down over the life of the mortgage.

In my case, the monthly mortgage payment I no longer need to make amounts to much more than any tax savings I was getting in previous years when I deducted interest.

After mortgage, you still get to deduct your real estate taxes, which may or may not be enough to let you itemize.

If you retire before eligible for medicare, you can deduct medical expenses, including insurance premiums. That plus real estate taxes may be enough to let you itemize.
thanks for the response and i'm sorry if my question wasn't clear enough. I understand how mortgages work. I'll be mortgage free in a few months and i'm trying to find ways to take advantage of 'other' ways to reduce my tax burden.
I was thinking buying another rental property....but the mortgage interest of that is offset by the rent collected.....i'm already maxing out 401k/ira/etc, and taking advantage of deducting property taxes, tc.....I can't think of other ways, especially after i stop paying mortgage interest.....


i hope that's more clear.
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Old 06-04-2014, 10:55 AM
 
Location: Los Angeles area
14,018 posts, read 17,744,100 times
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Quote:
Originally Posted by ansible90 View Post
If you retire before eligible for medicare, you can deduct medical expenses, including insurance premiums. That plus real estate taxes may be enough to let you itemize.
Also if you retire AFTER going on Medicare, you can still deduct medical expenses including insurance premiums, but the difference is it is highly unlikely that the amounts will come to a sufficient percentage of adjusted gross income to allow them as an itemized deduction. However dental expenses, which are not normally covered by Medicare, can be enough to push one over the threshold in some years.

I have never been able to deduct medical/dental expenses, but I am not complaining because that's actually a good thing.
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Old 06-04-2014, 11:08 AM
 
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
22,610 posts, read 39,974,527 times
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Buy the rental property, it is one of the few ways to be fairly tax efficient.

A mortgage deduction is certainly not worth the merit most RE agents promote (few others are so bold / misinformed to think it is a good idea). Why spend $1000 to get a $20 deduction in tax obligation. (I work to keep my total effective tax rate below 5%).

What did I do when I paid off my first mortgage (before age 26). I went to Dairy Queen and splurged on a $2 milkshake.

I have chosen to go back into a 3% mortgage, as I'm sick of catering to banks every 5 yrs on renegotiating new rates for commercial properties. My personal residence will be my bank/ I keep a few homes paid off, in case I get scalped.

Other Ideas for Tax deferred investments is HCA. You will need a BIG one!!! If you are into tax planning... then fill your ROTHs to the max (IRA's and ROTH 401k's)
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Old 06-04-2014, 11:17 AM
 
3,673 posts, read 4,937,285 times
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Quote:
Originally Posted by StealthRabbit View Post
Buy the rental property, it is one of the few ways to be fairly tax efficient.

A mortgage deduction is certainly not worth the merit most RE agents promote (few others are so bold / misinformed to think it is a good idea). Why spend $1000 to get a $20 deduction in tax obligation. (I work to keep my total effective tax rate below 5%).

What did I do when I paid off my first mortgage (before age 26). I went to Dairy Queen and splurged on a $2 milkshake.

I have chosen to go back into a 3% mortgage, as I'm sick of catering to banks every 5 yrs on renegotiating new rates for commercial properties. My personal residence will be my bank/ I keep a few homes paid off, in case I get scalped.

Other Ideas for Tax deferred investments is HCA. You will need a BIG one!!! If you are into tax planning... then fill your ROTHs to the max (IRA's and ROTH 401k's)

Thank you for the reply.
What is HCA? i know you don't mean Hydroxycitric acid
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Old 06-04-2014, 12:00 PM
 
1,770 posts, read 2,443,971 times
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When I paid off my mortgage, I borrowed $150,000 and started by eventual $286,000 remodel. It was fun! But then I inherited my dead ex-husband's university pension and his ghastly family sued me for it and it cost me about $100,000 to defend it so I have a great big mortgage now but hell, you can't take it with you and I have a great tax deduction. Thankfully, I'm not one of those people who are concerned about investments, leaving money to relatives, or that sort of thing so it's no big deal to me. And if/when I ever sell this place, it's worth a fortune so I'll still come out with enough cash to buy another house. Life sure does throw some surprises.
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Old 06-04-2014, 12:17 PM
 
Location: NC
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Hmmm. Just as I was signing the check that paid off my mortgage, I woke up! just joking
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Old 06-04-2014, 12:19 PM
 
Location: Albuquerque NM
1,661 posts, read 1,527,059 times
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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.
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Old 06-04-2014, 01:06 PM
 
70 posts, read 237,218 times
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I retired!
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