I think I’m ready to file my taxes for 2008 (using turbotax.com), but I’ve learned a couple things.
1. In order to be able to use mortgage interest as a tax-deduction, the amount of interest you pay must be more than the standard deduction, which is $5715. And now, I’m not particularly complaining about this, but my monthly interest is about $500, and right now it is the highest it will ever be. So I take that to mean, I *might* be able to take an itemized deduction for the 2009 tax year, but after that my total interest paid isn’t going to be over $6000 anyway. (Although now that I look at it, would the mortgage interest paid also be added to the standard sales tax deduction ($1000 this year) paid and the real estate taxes ($1300) each year? That would more easily become greater than $5715).
2. California owes me about $450, but they apparently do not know when they will actually reimburse tax returns that are filed. It also costs $34.95 to file California online with Turbotax, so I’m thinking of doing that one manually since who the heck knows when I’ll get the money back anyway.
3. I qualify for this first-time homebuyers tax credit of $7,500. It’s not really just free money… it is a zero interest loan for the next 17 years. Starting in tax year 2010, I’ll start paying it back in $500 increments each time I file my taxes. The caveat is that if I SELL the house before 2025, I have to repay the loan at the time of sale (or when I file for that tax year). HOWEVER, if when I sell, I do not make a profit on the house, then I do not have to repay. So it seems to me, if I take this credit and just put it toward the principle on the house, I will SAVE my 6% interest on that 7500 for the next 15 years, or for as long as I own the house, and I will walk away with more after a sale because I have paid more on the mortgage, regardless of if the value goes up or down.
4. Another option would be to put that money back into the house to do some upgrades that it needs (the electrical system, a dishwasher, grass for the backyard, etc). I guess my biggest dilemma is if I should save the money until I need it, or put it toward the mortgage and then borrow additional money (at possibly lower interest rate than the mortgage?) when it’s time to do repairs.
Hmm… what would Dave Ramsey do?
Oh, and by the way.. looks how nice the backyard/side yard look when they are a little bit cleaned up ? I can’t wait to see how it all looks when the leaves are green again.
p.s. These pictures are a few weeks old… I’m SLOWLY working at getting those piles of leaves taken care of… gotta bag them up and get them in the dumpster, but the trash guy only comes once a week.