Comments on: Just a few thoughts on itemizing and deductions http://geekyweekly.com/2009/just-a-few-thoughts-on-itemizing-and-deductions My life as a computer / photo / sound / video game / music / movie / gun geek Sat, 19 May 2012 02:55:39 +0000 hourly 1 http://wordpress.org/?v=3.4-beta4-20717 By: Andrew http://geekyweekly.com/2009/just-a-few-thoughts-on-itemizing-and-deductions#comment-17245 Andrew Sat, 17 Jan 2009 00:22:19 +0000 http://geekyweekly.com/?p=797#comment-17245 You're talking to a guy who went through a couple years of calculus, linear algebra, numerical analysis, statistics, and logic classes. I got a stack of finance and computer books for Christmas. What could possibly be more fun than doing taxes? We could have a tax Pepsi Party. Fill out a line of your 1040 and take a sip of Pepsi. I bet my bippy it would be fun. You’re talking to a guy who went through a couple years of calculus, linear algebra, numerical analysis, statistics, and logic classes. I got a stack of finance and computer books for Christmas. What could possibly be more fun than doing taxes?

We could have a tax Pepsi Party. Fill out a line of your 1040 and take a sip of Pepsi. I bet my bippy it would be fun.

]]> By: sarah http://geekyweekly.com/2009/just-a-few-thoughts-on-itemizing-and-deductions#comment-17244 sarah Fri, 16 Jan 2009 23:55:57 +0000 http://geekyweekly.com/?p=797#comment-17244 We would be paying someone to give us more free time to do fun stuff. We would be paying someone to give us more free time to do fun stuff.

]]> By: Andrew http://geekyweekly.com/2009/just-a-few-thoughts-on-itemizing-and-deductions#comment-17243 Andrew Fri, 16 Jan 2009 22:54:23 +0000 http://geekyweekly.com/?p=797#comment-17243 The cost of selling definitely sucks. Commissions and closing costs would normally eat into any appreciation that occurred, but on top of declining prices it is a double whammy. The cost of selling definitely sucks. Commissions and closing costs would normally eat into any appreciation that occurred, but on top of declining prices it is a double whammy.

]]> By: nathan118 http://geekyweekly.com/2009/just-a-few-thoughts-on-itemizing-and-deductions#comment-17242 nathan118 Fri, 16 Jan 2009 22:22:33 +0000 http://geekyweekly.com/?p=797#comment-17242 Right, the interest over the life of the loan is just scary. I do an extra payment a year, which cuts the life of a 30-year loan by something like 5-7 years. With the way prices have dropped we'll probably owe more than our place is worth when we decide to move. If that's the case, I actually hope they'll drop enough that the loan on a new place is low enough that I can float both mortgages (and have the current one mostly covered by a rental income). The idea of shelling out $50-100k just to LEAVE is crappy. Right, the interest over the life of the loan is just scary. I do an extra payment a year, which cuts the life of a 30-year loan by something like 5-7 years.

With the way prices have dropped we’ll probably owe more than our place is worth when we decide to move. If that’s the case, I actually hope they’ll drop enough that the loan on a new place is low enough that I can float both mortgages (and have the current one mostly covered by a rental income). The idea of shelling out $50-100k just to LEAVE is crappy.

]]> By: Andrew http://geekyweekly.com/2009/just-a-few-thoughts-on-itemizing-and-deductions#comment-17241 Andrew Fri, 16 Jan 2009 21:41:52 +0000 http://geekyweekly.com/?p=797#comment-17241 Oh it will be fun, plus you know I can't pay someone to do something that is well within my skill set. Oh it will be fun, plus you know I can’t pay someone to do something that is well within my skill set.

]]> By: Andrew http://geekyweekly.com/2009/just-a-few-thoughts-on-itemizing-and-deductions#comment-17240 Andrew Fri, 16 Jan 2009 21:36:23 +0000 http://geekyweekly.com/?p=797#comment-17240 I underestimated the interest loaded onto the beginning of the loan. 30 year fixed at 5% on $300k would net $14,900 in interest for the first year with a $1,600 monthly payment. By year 24 the interest is down to $5,380 per year. A 15 year fixed has similar interest payments at the beginning and ramps down to $5,770 in year 11 so the deduction would be similar. So I think my real issue is with the interest on the loan. With that 30 year fixed, interest would be $280k over the life of the loan. The 15 year drops it to $127k, but a decent alternative would be to just pay extra on a 30 year every month with the option of dropping to the regular payment if things get tough. Adding $700 in principal prepayment would match the 15 year monthly payment and reduce total interest to $132k and the length of the loan to 15 years. Will have to see where housing prices go. As prices have come down my resistance to buying has lessened after crunching a few numbers. When we got married buying just simply wasn't an option. Now renting has a bit of an advantage. If prices drop further then it will start to tilt in the buy direction. I underestimated the interest loaded onto the beginning of the loan. 30 year fixed at 5% on $300k would net $14,900 in interest for the first year with a $1,600 monthly payment. By year 24 the interest is down to $5,380 per year.

A 15 year fixed has similar interest payments at the beginning and ramps down to $5,770 in year 11 so the deduction would be similar.

So I think my real issue is with the interest on the loan. With that 30 year fixed, interest would be $280k over the life of the loan. The 15 year drops it to $127k, but a decent alternative would be to just pay extra on a 30 year every month with the option of dropping to the regular payment if things get tough. Adding $700 in principal prepayment would match the 15 year monthly payment and reduce total interest to $132k and the length of the loan to 15 years.

Will have to see where housing prices go. As prices have come down my resistance to buying has lessened after crunching a few numbers. When we got married buying just simply wasn’t an option. Now renting has a bit of an advantage. If prices drop further then it will start to tilt in the buy direction.

]]> By: sarah http://geekyweekly.com/2009/just-a-few-thoughts-on-itemizing-and-deductions#comment-17238 sarah Fri, 16 Jan 2009 19:04:03 +0000 http://geekyweekly.com/?p=797#comment-17238 Why do I have to learn the ropes, I have no problem paying someone to do my taxes for me. In this tough financial market I feel like I should contribute where I can and give my old accountant some work. He is really nice, Andrew you should meet him. : ) Why do I have to learn the ropes, I have no problem paying someone to do my taxes for me. In this tough financial market I feel like I should contribute where I can and give my old accountant some work. He is really nice, Andrew you should meet him. : )

]]> By: nathan118 http://geekyweekly.com/2009/just-a-few-thoughts-on-itemizing-and-deductions#comment-17237 nathan118 Fri, 16 Jan 2009 18:04:56 +0000 http://geekyweekly.com/?p=797#comment-17237 You said "The mortgage interest deduction is touted as one of the benefits of home ownership, but people like me wouldn't benefit at all from it." Yes, if you owned a home and were paying mortgage interest, you would benefit from the mortgage interest deduction. The chances of someone only spending $6000 on mortgage interest in Southern California is almost impossible. On our cheaper townhouse we payed closer to $20,000 in interest last year. Unless you're near the end of the loan's life, or you've got a rinky dink trailer in compton, your mortgage interest will probably put you over the standard deduction. Now whether the interest deduction and other values of home ownership outweigh renting is a different discussion, but you can't say the mortgage interest deduction isn't beneficial. Is it a HUGE deal that should convince someone to go from renting to owning? No, it's not, and I think on that we'd agree. You said “The mortgage interest deduction is touted as one of the benefits of home ownership, but people like me wouldn’t benefit at all from it.”

Yes, if you owned a home and were paying mortgage interest, you would benefit from the mortgage interest deduction. The chances of someone only spending $6000 on mortgage interest in Southern California is almost impossible. On our cheaper townhouse we payed closer to $20,000 in interest last year. Unless you’re near the end of the loan’s life, or you’ve got a rinky dink trailer in compton, your mortgage interest will probably put you over the standard deduction.

Now whether the interest deduction and other values of home ownership outweigh renting is a different discussion, but you can’t say the mortgage interest deduction isn’t beneficial. Is it a HUGE deal that should convince someone to go from renting to owning? No, it’s not, and I think on that we’d agree.

]]> By: Andrew http://geekyweekly.com/2009/just-a-few-thoughts-on-itemizing-and-deductions#comment-17236 Andrew Fri, 16 Jan 2009 16:20:44 +0000 http://geekyweekly.com/?p=797#comment-17236 I was targeting this as an evaluation of certain tax strategies instead of reasons to own a home. The mortgage interest deduction is always referenced as something beneficial and I had never seen an analysis that was critical of it. If you went by what someone in the industry says like <a href="http://www.lendingtree.com/smartborrower/buying-a-home/getting-ready/tax-benefits-of-owning-a-home/" rel="nofollow">Lending Tree</a>, "One of the biggest incentives to owning a home is that the interest you pay on your mortgage is tax-deductible", you'd only get half the picture. For people who pay someone to do their taxes and have never even set eyes on a 1040, this could be very misleading. And sadly when you Google "tax benefits of owning a home" you get industry websites that have a vested interest in selling you a massive loan. Our return is going to be even simpler this year so it will be a good for Sarah to learn the ropes with TurboTax. I was targeting this as an evaluation of certain tax strategies instead of reasons to own a home. The mortgage interest deduction is always referenced as something beneficial and I had never seen an analysis that was critical of it.

If you went by what someone in the industry says like Lending Tree, “One of the biggest incentives to owning a home is that the interest you pay on your mortgage is tax-deductible”, you’d only get half the picture. For people who pay someone to do their taxes and have never even set eyes on a 1040, this could be very misleading.

And sadly when you Google “tax benefits of owning a home” you get industry websites that have a vested interest in selling you a massive loan.

Our return is going to be even simpler this year so it will be a good for Sarah to learn the ropes with TurboTax.

]]> By: nathan118 http://geekyweekly.com/2009/just-a-few-thoughts-on-itemizing-and-deductions#comment-17235 nathan118 Fri, 16 Jan 2009 15:57:25 +0000 http://geekyweekly.com/?p=797#comment-17235 Oh and I was going to add that Turbo Tax is cool because it tells you which deduction you should take. :) Oh and I was going to add that Turbo Tax is cool because it tells you which deduction you should take. :)

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