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I want to put 8 months worth of mortgage payments and 1 year property tax in a checking or savings account that I don't use . The savings account has a rate of 1% money will be taken out once a month so that is fine with savings account regulations. Since savings earns interest and at the end of the year you have to pay taxes on that interest should I just keep it in a checking account and from there pay the mortgage every month?
sidebar: We shouldn't have to pay tax on savings we already paid taxes on that money.
I want to put 8 months worth of mortgage payments and 1 year property tax in a checking or savings account that I don't use . The savings account has a rate of 1% money will be taken out once a month so that is fine with savings account regulations. Since savings earns interest and at the end of the year you have to pay taxes on that interest should I just keep it in a checking account and from there pay the mortgage every month?
sidebar: We shouldn't have to pay tax on savings we already paid taxes on that money.
You have already paid tax on money you put into the savings account. You have not paid tax on the interest it earns; that is new income. Since you will be taking money out on a monthly basis the amount of interest you earn at 1% is going to be small anyway but you will be ahead by a little bit by using the savings account.
I want to put 8 months worth of mortgage payments and 1 year property tax in a checking or savings account that I don't use . The savings account has a rate of 1% money will be taken out once a month so that is fine with savings account regulations. Since savings earns interest and at the end of the year you have to pay taxes on that interest should I just keep it in a checking account and from there pay the mortgage every month?
sidebar: We shouldn't have to pay tax on savings we already paid taxes on that money.
You are not really talking very much money. The interest will probably be a few hundred dollars (probably less) and at an average tax rate of 15% you are only talking a few dollars.
Let's assume you put $16K into the account (8 months x $2000). Your interest would be $160. $160 taxable (assuming 15% effective tax rate) is $24. Not enough to worry about. Plus you will have earned $136.
Good luck! And remember, this the time to start formulating your next new plan.
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