That's A Stupid Tax Write-Off
Steve is about to pay off his condo but is worried about losing his tax write-offs.
QUESTION: Steve’s condo will be paid off within the year. He wants to know if he can get a tax write-off, so they can begin saving to have children. Dave advises him to give more to charities, but cautions him against doing anything just for tax write-offs.
ANSWER: You can give more; that will create a tax write-off. That’s the easiest thing to do, but don’t take out a mortgage for the tax benefit. If you have a $200,000 at 5% interest rate, you would pay about $10,000 in interest. If you made $70,000 and wrote off $10,000, you’d pay taxes on $60,000. If you made $70,000, you’d be in a 25% tax bracket. If you didn’t have the write-off, you’d pay $2,500 in taxes on that extra $10,000. That means you’d send the bank $10,000 to keep from sending the government $2,500. If you want the tax deduction without the debt, give more to your church. You can also adopt a child and get a tax credit. Just beware of doing things from a tax viewpoint; that’s a bad plan.