Mailbag: Should I Pay Off My House?

On this week's show, we'll answer some mailbag questions that have come in. We'll discuss if you should pay off your house, financially support adult children, and how often you should communicate with your advisor.

 

Important Links: 

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript: 

Speaker 1:

Back for another edition of Plan With The Tax Man, with Tony Mauro, from Tax Doctor Inc. We're going to talk, well, actually, email questions this week. We haven't done an email show for a while, so we're going to take some questions from folks that have sent stuff into the office, or the website at yourplanningpros.com. That's yourplanningpros.com. You can get your questions asked and answered, and get yourself some time on Tony's calendar to sit down and talk about your retirement situation, or your tax situation.

Tony is a CPA, CFP and EA of over 27 years experience, and a great resource for you to tap into here. Well, he's got clients all over the place, but his office is in Des Moines, so reach out to him online at yourplanningpros.com. What's going on, my friend? How are you?

Tony :

I'm good. Enjoying the summer. How about you?

Speaker 1:

Doing the same. Hanging in there, rocking and rolling. Well, actually, about the time we're going to drop this, it's going to be probably right after 4th of July, so I hope that you had a good 4th of July. We're taping it ahead of 4th of July, but we're dropping it after, so hopefully you have a good one.

Tony :

Yeah, yeah. Hopefully everybody out there is going to get out and get a chance to enjoy the summertime. I like the summers the best.

Speaker 1:

Any 4th of July plans, both since we're ahead of time?

Tony :

Not much for us this year. Probably just relaxing around home a little bit. Maybe playing a little golf, and watch fireworks. Yeah.

Speaker 1:

There you go. Sounds like a plan. Yeah, we got some family coming in. We'll be around the pool, hot dogs and burgers, and all that good stuff. Classic 4th of July for us. Anyway, hope everybody has a good one, and had a good one, I should say by the time you're catching this podcast. But let's go ahead and take some email questions, Tony, from around the area, we'll have a fairly short podcast this week, but we'll see if we can help some folks out. We got an email from Tony, and it was not you.

Tony :

Yep.

Speaker 1:

But Tony did say, "Hey, Tony, I'm hesitant to pay off my house, because I don't have many other tax deductions at this point, but I do have a hundred grand on the bank, and only owe 45 grand on the house, so I'm really tempted to pay it off. What's your thoughts?"

Tony :

I'd tell Tony to pay it off.

Speaker 1:

Yeah?

Tony :

I'll tell you why. A lot of people get hung up on, "I don't have any other tax deductions," and they don't realize how, especially with only a $45,000 mortgage, how little their tax deduction really is, if even they can use it on the federal side, because they don't have a lot of other deductions. This particular deduction goes on a schedule A, and there's a threshold you have to get over, which is, for singles $12,000 and some change. If you don't have other deductions to get you over that, you won't even be able to use it.

I would say that even if, let's say your mortgage interest, for example, is $2,000, $3,000 a year on that, probably even be [inaudible 00:02:37] by now, your tax savings, if you're in a 20% bracket, maybe $600 versus, I don't know how much you're spending on the mortgage, but let's say your mortgage payment's $800 a month, times 12, that's $9,600 a year. I'd rather have that in my cash flow, and build that a hundred thousand back up. Then keep letting that money grow.

Speaker 1:

Yeah.

Tony :

That's my philosophy. I'm not a big debt guy. Especially, I like to not have a lot of debt, and I advise people not to carry a lot of debt.

Speaker 1:

Now, the tax deduction-

Tony :

Obviously... Oh, go ahead.

Speaker 1:

Sorry, I didn't mean to cut you off there. The tax deduction part of this question is a moot point right now, correct?

Tony :

It is.

Speaker 1:

Yeah.

Tony :

Yeah, it is a moot point. I think that you're better off long-term, is snowballing your cash flow, and it won't take you long to recoup the money, the $45,000. Then it's just all gravy from there, and you're out of that debt. But obviously, you can't do that if you're a young person going out, and just buying their first home, generally.

Speaker 1:

Right, right.

Tony :

But you could try to pay it off early.

Speaker 1:

Well, this is always an interesting question,