Quote:
Originally Posted by GoRedSox!
I think most folks no longer itemize deductions after the Tax Cuts and Jobs Act of 2017, and if they do, State and Local Taxes (SALT) has a $10,000 cap on the deduction. That being said, most of the provisions in that tax cut were temporary. It was passed under Reconciliation in the Senate which avoided the filibuster, and because the law added to the national debt, the provisions were made temporary and most are set to expire after 2025. It will be interesting to see if Congress acts to extend them or if they will revert to the pre-2017 tax code. If it does, the standard deduction will go back down and many more folks may go back to itemizing and the deductibility of the bond may be more of an issue. It may not be mortgage interest, but is it a tax?
We chose not to pay off our bond because the interest rate on the bond is lower than the current interest rates for savings. That equation could change going forward and we will keep our eye on that. The bonds in the new sections in the South are more expensive not only because the bonds are higher, but so is the interest rate. A bond of $40,000 with an interest rate of 5.47% carries an annual payment of a little over $2,900.
|
The bond is not a tax. The interest on the bond is not tax deductible because, unlike a mortgage, the bond amount is not based on the value of the house. The bond interest is listed in the non-ad valorem section of the tax bill because it is not a tax and it is not "based on value" which is what "ad valorem" means. You cannot deduct anything in the non-ad valorem section unless the house is rental property. Some people deduct the bond interest on their income tax return because they either don't understand that it is not deductible or because they are cheating. Actually, you can deduct anything you want on your tax return as long as the IRS doesn't catch it.