Don’t look now, but we’re just a few short months away from tax season getting underway once again. As a homeowner, you obviously want to get the highest return possible from Uncle Sam. That’s why it’s important to understand the new tax laws effective in 2018.
Starting this year, your deductions for property taxes and state income taxes are limited to $10,000. So homeowners who pay more than $10,000 in property and state income taxes will receive no tax benefit. In addition, mortgage interest deductions are now limited to purchase loans of up to $750,000 and you get no tax deduction for home equity loans used to finance remodels or other home projects.
Here are a few ways to legally beat these new tax laws:
Invest in our strategic income fund
Your best bet is to invest in our Tactical Wealth Fixed Income Fund and have us issue a mortgage or home equity loan. The mortgage interest you pay is offset against the interest income you earn through our fund and only the net is reported. Say goodbye to the years of reporting interest income and mortgage interest separately and, therefore, losing valuable deductions.
Treat mortgage interest paid on your loans as investment interest
The Tactical Wealth Fixed Income Fund is not for everyone. Alternatively, mortgage interest paid on your loans through us can be considered investment interest, which is not subject to the new laws limiting mortgage interest deductibility. You can then choose to deduct the entire amount of interest paid as investment interest.
How does Tactical Wealth do this? Well, our first action item involves the setup of what’s called a Mortgage Offset Account. Think of this as a type of flexible mortgage which calculates interest payable on the net balance between a home loan and a specified investment account.
Not only does this lower the lifetime interest paid on your home loan, but it can also have significant tax advantages as tax is no longer paid on interest earnings. The separate offset account arrangement ensures that cash balances are immediately available for use if needs require.
Take a look at the infographic as an example.
An individual earns a $250,000 annual salary and has a mortgage balance on their primary residence of $600,000 with interest charged at 4.5 percent. On top of that, the individual has a $300,000 balance in a high-interest savings account earning 3.2 percent interest. The use of the offset account will make the individual nearly $23,000 better off per year, or $674,000 over a standard 30-year mortgage.
High-Return Investments With Tactical Wealth
Here at Tactical Wealth, we always have your financial needs in mind. Wondering what else you can do besides taking advantage of the newest tax laws? Well, as you may already know, mortgage rates are historically low.
There’s never been a better time to get the most out of this wealth-building technique. Just move your investments to us and we will fund your mortgage loan and invest the loan proceeds. Not only do you net the spread between the two, but you also get tax advantages down the road.
Be sure to ask the Tactical Wealth team about structuring a zero payment loan so you can simply pocket the net difference between the interest you earn and the interest paid.