The tax man cometh
So I'm finally finished my taxes and now it's a question of just getting everything addressed and mailed off (certified, of course). Some people have been surprised that I've waited this long to mail my taxes, but here's the deal -- I owe Uncle Sam money, and I'm in no hurry to turn it over to him. I did my taxes back in January, discovered the sad truth, and have been sitting tight ever since. Of course, there's the thought that if I owe taxes, that means I've had income this year. Still, that's minor consolation when it comes to actually paying up.
I did learn something new while doing my taxes. I've always taken advantage of a particular tax "savings" strategy for the last few years and I've always thought I've made a smart financial move. Well, come to learn this year, I've been an idiot and a fiscal nicompoop. In a nutshell, to save $1 in taxes, I had to spend $7 and the net loss to me is $6. If I went to any thinking adult on the street and said, "Hey, if you gave me $7, you could save $1 on your taxes, how about it?", the any thinking adult on the street would laugh in my face and walk away. I should note that the $7 that I "gave away" for every $1 wasn't for the purpose of owning tangible property, so I'm essentially out assets all for a measly savings; I'd have come out ahead if I'd just taken the tax hit. Clearly, I won't be doing this again next year. Live and learn, I guess.
I think the same thing is true about a house about how you get a break for the mortgage, and I haven't done the math, but I think it's the same concept as my "learnings" above. Yes, homeowners get a tax deduction, but it's something like you have to pay $1 to get 33 cents back on your taxes. I mean, it's better than not getting the 33 cents back and if you're going to buy the house anyway, then it's moot and maybe even a bonus, depending on your circumstances. But the more I think about it, the tax arguments for buying a house seem kind of nicompoopish.* There's an interesting article here that basically says depending on your house, location, equity, etc., the tax benefits of a mortgage payment can vary. With my luck, I'll be the couple in Akron, OH, who get absolutely no tax benefit from owning a home.