Pay Off the Mortgage
Diana's accountant has given her some stupid advice - keep the mortgage to get a tax deduction!
QUESTION: Diana and her husband make $288,000 a year and her husband is a contractor in Afghanistan. They are in a 33% tax bracket. Should they pay off their house with the excess money, or take their accountant’s advice and keep the mortgage to get the tax deduction?
ANSWER: You don’t keep a house to get a tax write-off. You’re paying $7,680 in interest per year, so you have that as a tax deduction. When you have that, it saved you $2,500 in taxes. Your accountant is telling you to send $7,680 to the bank to keep from sending $2,500 to the government. That’s stupid! You can pay the house off, give $7,680 to a charity and keep the tax deduction without the debt.