If you are very wealthy, it’s worth considering, but some downsides I see is that you would lose the tax break that everyone is taking when paying these yearly. The tax break is pretty big for high income folks (45%?) Another thing is the time value of money. $5000 30 years from now even if increased 2% a year is not the same as $5000 today which is worth a lot more.
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People hitting that AMT yearly would not be able to deduct their property tax, including the MR. Judging by the income survey, that includes a lot of piggs.
This would all be exactly right and accurate if the government didn’t devise a way to allow for double taxation known as the AMT.[/quote]
LOL. Exactly. Darn AMT will get you every time! Your accountant can be skillful but no way some of us can find loopholes to avoid AMT!
I think a lot of people don’t pay them off because, for 1, they don’t have the cash, 2) they rather just keep the cash themselves since no one knows what will happen and if they will stay in the home long term.
If you are very wealthy, it’s worth considering, but some downsides I see is that you would lose the tax break that everyone is taking when paying these yearly. The tax break is pretty big for high income folks (45%?) Another thing is the time value of money. $5000 30 years from now even if increased 2% a year is not the same as $5000 today which is worth a lot more.
There’s little to no inflation now (according to the fed, but tons of inflation in things like education/healthcare, etc…)…
That said, similar to a mortgage, the CFD could be worth a lot in saving high income people a lot of taxes and if inflation were to come back, the mortgage and the CFDs won’t be as bad in 20-40 years neither.
All that said, you really have to just do the math to see if it makes sense for your situation.
No plans to pay here since we don’t have the money and could use more funds for business instead.[/quote]
Joe,
Yep. Lots of people don’t pay them off because they don’t have the cash. True. But even if they have the cash, most people VASTLY over estimate their investment abilities. Most people I know think they are stock gurus and in an upmarket like now they think they are Warren Buffett Jr.! (A few years ago….um not so much).
I saw grown men need some Depends adult diapers during the financial collapse! LOL. I saw grown men weeping and scared at the amount of paper losses they had. So I’d say spare me the details of “I can easily GUARANTEE to double my money in X years”. Sorry but there is no such thing as guaranteed ROI with NO RISK for the most part.
As you mentioned, no it doesn’t make sense for everyone. You just have to look at your personal situation, how long you will stay in the property, etc.
Well, we already covered the AMT lesson so scratch your idea on that for a large % of the people that probably have the cash to pay it off to begin with. As OCrenter mentioned….we get raped in AMT.
But to be sure, paying it off isn’t for everyone. You just have to look at your individual situation. But in my experience, people will always find excuses why they shouldn’t pay them off. Typically mostly related to them thinking (or explaining to me) how they will make much better returns somewhere else. When I ask them if it’s GUARANTEED with NO risk…. well the answer is always no.
