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March 15, 2010

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If people would quit harping on #4 like it has any importance in people's lives at all then they could quit filling their articles with fluff and talk about stuff that really matters.

Not one single person in the history of this country has ever had their finances deminished by anything other than a statistically insignificant amount by getting a tax refund that is a grand or two more than necessary.

There is no exaggeration or hyperbole in that statement.

I have a problem with this statement: "your mortgage comes with an amortization schedule that front-end loads the interest portion of your payment". That is misleading. Any fixed-payment, fully amortizing loan will behave this way. To have a loan where you pay the same portion of interest each year, the loan would have to have a payment that is set as a percentage of the loan value (an example of course being an interest-only loan).

I've heard so many people repeat Myth #1, and had a lot of tell me I was crazy to pay off my mortgage. But a couple of thousand dollar mortgage that resulted in a couple of hundred dollar tax savings per month didn't seem like a good trade-off to me.

If you need a deduction, consider giving to your church or charity as a write-off. This is the same thing as keeping that mortgage around. Your money will do a lot of good and you will get your quarter back as talked about above.

Thank you for breaking some of these myths. Hopefully many more catch on and will prosper as a result!

I'd take issue with the idea that most people need a CPA to help
with their taxes. If you know how to READ, you can do a short form,
and I'd say that the majority of those who need the long form can
do it themselves. Lots has been made of the complexity of tax forms,
and they have been the butt of many a joke...the tax code and forms ARE
overly complex, but I'll bet no more than 25% of us need assistance
from a CPA. (It's my belief that Mr. Geithner understood what he was doing,
he was just a crook.)

I agree with Harm, for yearly taxes if you use a product like Turbo Tax Deluxe it will have the information you need on almost all tax topics. If you have further questions you can go to IRS.gov for detailed information on a topic.

Once you have a more complicated situation such as many investments etc. it may very well pay you to visit a CPA for tax planning purposes.

Tim and Harm--
The problem is: yes, most people can read about taxes; however, many people's eyes glaze over if they even have to think about them for more than 3 minutes at a time...It is a very dry subject (I don't mind doing my taxes, but I see what type of reactions I get from others when I try to talk taxes).

Even though tax prep software can help to guide you along, there are still many little things that go unnoticed or unknown, things like whether or not you can deduct points paid on a refinance... A: Yes, although only if the costs are truly 'points' as in a certain percentage of the mortgage, and only a portion each year (evenly divided over the 30, or 15, years of the loan), except in the case that you sell your home. That year you can deduct the remainder of the points.

Confusing to some...disagree?

I don't buy into the "pay off your mortgage now" philosophy. I carry a mortgage, and will continue to do so until I leave my job and move somewhere else, for the simple fact that REAL investment return on homeownership is less than 3.5%. Maintenance not included, and can result in a loss because under the tax rules, you can't write off your basis unless the sale is taxable. I can get better returns on my 401k, Roth IRA, HSA, and brokerage acccounts, over the next 20-30 years than my house in my area will ever do. I've learned a big lesson that a home is place to live, not the best investment you can make. It can also be a ball and chain when you value freedom to move.

I enjoyed this post. I think everyone could benefit from wrapping their heads around Myths 1, 2, and 3. I personally agree with Myths 4 and 5, but I think those two aren't necessarily correct for everyone.

Getting a big tax refund loses you 1-2% (right now) on $1k-$3k...that just won't break the bank or anything. I personally try not to give or receive much during the tax season, but to each their own.

Hiring a CPA makes sense to me since I hate doing our taxes, but if all you need to file is a simple 1040 or something, a CPA is just too big of an expense to justify (at least our CPA would be...I think she'd charge almost $100 for a single schedule). My husband and I have some business loss deductions that were just a little above our heads, so we used our CPA for the last 3 years. Next year, we'll have a choice to make. Our personal lazy factor may be taken into account...

Good myths to be 'busted'. I am fond of all discussions that toss around the "is better or not better to pay off the mortgage". I remain on the fence, I this is one of those: What feels good for you; issues.

Me, I enjoy paying taxes. Would I prefer to keep all my money,yep. But all in all we get a lot for what we pay. It's part of the contract. I always ask my friends who complain: And what services would you like to give up?"

Frankly our taxes--Federal-- are pretty low. I'd be happy to see them at Ronald Reagan's rates.

But, that's just me.

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