The vast majority of people dislike tax time. For most people, filing tax returns is the most painful thing to do. They keep trying to devise ways on how to save on taxes. They feel that they have worked hard day and night and then the taxman comes along and takes away all their hard-earned money. Instead of grumbling about it, do something about it.
There are numerous strategies for saving on taxes and you should choose the one that suits your circumstance. In general, you need to tailor your returns in such a way that certain expenses are maximized and you're taking advantage of all the legal tax deductions available to you. Always consult with a tax consultant to learn ways you can save a lot of money on your taxes. There are so many deductions you can take advantage of and you just need to be a little smart and informed. If you keep yourself updated with the latest tax deductions, you'll be able to end up paying a much smaller amount to the tax collector.
Does Mortgage Interest Deduction Really Save You Tax?
If you have a home mortgage loan, you can save a lot of tax dollars by simply taking advantage of the mortgage interest deduction. The bad news is, you do not really know how to save on taxes. If you fall in the 30 percent tax category, it will mean for each dollar you pay in interest you save only 30 cents. So what's the big deal? In addition to paying so much money in interest, you are still paying 70 cents on every dollar.
In the first few years of the loan, you are paying money against the interest, and your principle amount remains intact. So when you move out of that house after 5 years, you will be shocked to realize that all those years you have just paid interest and have not even touched the principal amount. For this, your lenders love you for all that extra money they make off you.
You really need to research on how to save on taxes.
While you may need to take up a mortgage to buy a decent home, you need to get rid of the mortgage as soon as possible if you are really wanting to save on taxes. The genuinely rich people do not keep a mortgage for very long. They understand the benefits of paying it off early.
Also, you must be aware that the mortgage deduction clause has an upper limit of $1.1 million. Anything above that is not deductible. Don't worry about how to pay off such a huge amount; if you plan your payments wisely, you can easily achieve this goal. A little extra payment annually can create wonders for you. You can chalk out a bi-weekly plan where you pay your mortgage interest every two weeks instead of once every month. So avoid prolonging your mortgage repayment just on the pretext of saving tax on mortgage interest deduction.