Is Paying Off Your Mortgage Still a Good Idea?
Is Paying Off Your Mortgage Still a Good Idea?
For decades, the most common and well-accepted belief is that paying down your mortgage is a good idea. After all, the quicker you pay it off, the less money you throw away in interest payments. So it stands to reason that getting it paid off faster just makes sense. But is that still the case? Or, have the changes to the tax law turned things upside down?
Tax Cut and Job Act Changes
First off, with the Tax Cut and Jobs Act (TCJA) there are some big changes coming to mortgages and taxes. For starters, the law will now limit the property tax deduction, and lower the mortgage limit from $1 million to $750,000and only on your primary residence. These made a lot of headlines when the TCJA was first proposed and later passed. However, there are some other changes that could have an even bigger impact.
Mortgage Deduction on Rental Property
For example, say you wanted to purchase a rental property and use equity from your primary residence to make a down payment. In the past, you would have expected this mortgage interest to be deductible. However, because of the recent changes to the nation’s tax law, only the mortgage debt use do purchase the original property is tax-deductible. Cashing out equity would be deductible but only if you were using it to refinance an improvement on your current home.
Consider Your Tax Situation
The idea that paying off your mortgage as quickly a possible is always a good idea may never die. However, under the new tax plan the numbers will change so it’s something you should at least consider. As with any tax change, everyone is different so there is no one set right answer. Forsome, it might make sense to pay off their mortgage sooner. For others it could make sense to hold onto it longer.
Standard Deduction or Itemizing?
Let’s look at one example.If you no longer plan to itemize your deductions because the new standard deduction will now be higher, then paying off your mortgage faster definitely make sense. Holding onto this extra interest without the benefit of a tax deduction is a waste of money. On the other hand, if you are planning to still itemize your deduction, then holding onto your mortgage longer might make more sense. That’s becauseas soon as you’ve paid off that debt you lose the ability to deduct it from your taxes. Additionally, if you’re in a higher tax bracket you will likely pay more taxes if you pay your mortgage off faster.
Saving vs. Paying
Meantime, anyone who is already saving enough for their all their financial goals –whether it’s for retirement, your kid’s college funds, etc. –should consider using any extra money they have to pay down their mortgage. This is especially true for anyone who is not itemizing and instead using the standard deduction.In the end, if you aren’t sure how the new taxes will affect your mortgage interest and deduction, it’s a good idea to meet with a tax professional to review your situation. This will help you plan accordingly for the best results.
We hope you found this article about “Is Paying Off Your Mortgage Still a Good Idea?” helpful. If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page or our website at www.GROCO.com. Unfortunately, we no longer give advice to other tax professionals gratis.
To receive our free newsletter, contact us here.
Subscribe to our YouTube Channel for more updates.
Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com. GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.
Alan L. Olsen, CPA, Wikipedia Bio
GROCO.com is a proud sponsor of The American Dreams Show.
The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business.
Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind.
The American Dreams show became the solution, first as a radio show and now with YouTube videos as well. Always respectful of interview guest’s time, he’s able to give access to individuals information and inspiration previously inaccessible to the first-time entrepreneurs who need it most.
They can listen to venture capitalists and successful business people explain first-hand, how they got to where they are, how to start a company, how to overcome challenges, how they see the future evolving, opportunities, work-life balance and so much more..
American Dreams discusses many topics from some of the world’s most successful individuals about their secrets to life’s success. Topics from guest have included:
Creating purpose in life / Building a foundation for their life / Solving problems / Finding fulfillment through philanthropy and service / Becoming self-reliant / Enhancing effective leadership / Balancing family and work…
MyPaths.com (Also sponsored by GROCO) provides free access to content and world-class entrepreneurs, influencers and thought leaders’ personal success stories. To help you find your path in life to true, sustainable success & happiness. It’s mission statement:
In an increasingly complex and difficult world, we hope to help you find your personal path in life and build a strong foundation by learning how others found success and happiness. True and sustainable success and happiness are different for each one of us but possible, often despite significant challenges.
Our mission at MyPaths.com is to provide resources and firsthand accounts of how others found their paths in life, so you can do the same.
Impact Venture Capital & GROCO’s “Venture Vision” Seminar 2 of 6 (To register FREE, click here.) This free online instructional seminar on January 11, 2023, at 10 AM is an excellent opportunity to learn more about the risks and rewards associated with venture capital (VC) investments. By covering topics such as the stages of funding,…
Introduction: In this interview, Alan Olsen, CPA and featured guest Bill Gombert discuss comprehensive financial planning and much more. Transcript: Alan Olsen Hi, this is Alan Olsen and welcome to American Dreams. My guest today is Bill Gombert. Bill, welcome to today’s show. Bill Gombert Thank you very much pleasure to be here. Alan Olsen So, Bill, you’re…
Introduction: In this interview, Alan Olsen, CPA and featured guest Brett Kaufman discuss Building Conscious Communities and much more. This Transcript of Alan and Brett’s discussion of conscious community building has been generated by software and may have inaccuracies: Alan Olsen So Brett in our segments here in American Dreams, we talked about pathways of life and things…
Insights Into Venture Capital Investing From Seminar 1 of 6 (To register for seminar 2 of 6 FREE, click here.) “In an era where financial landscapes are constantly being reshaped, it’s crucial for investors to stay ahead of the curve. The Venture Vision Webinar, a joint initiative by GROCO and Impact Venture Capital, recently hosted…