Exact Same Math

Bonnie wants to know why Dave tells people to pay off the house instead of using it for a tax deduction. Dave explains.

QUESTION: Bonnie on Twitter wants to know why Dave tells people to pay off the house instead of using it for a tax deduction. Dave explains.

ANSWER: If you have a $200,000 house at 5% interest, you paid $10,000 in interest. You can take a tax write-off on $10,000 if you pay out $10,000 to the bank. If you make $70,000 a year, you’re in a 25% tax bracket. If you don’t pay $10,000 on taxes, that saves you 25% of $10,000—or $2,500. So here’s your tax write-off: You send Countrywide Mortgage $10,000 to keep from sending the government $2,500. Bad idea. If you’re going to do that, why don’t you give that to your church, and you don’t have to be $200,000 in debt to pull that off. Exact same math.