Is there really a tax benefit to having a mortgage for homeowners?

That actually makes perfect sense now. We're married filing jointly, and our itemized deductions probably don't come close to $27,700. So basically the mortgage interest deduction is completely useless for us right now. For rental properties though - would there be any calculation to figure out how beneficial the mortgage interest would be as a business expense? Like if I had a rental property with a $5k annual mortgage interest, how would that actually impact my taxes compared to if I paid cash for the property?

The tax benefit for rental property mortgage interest is straightforward - it directly reduces your rental income before calculating taxable profit. If you have $15,000 in rental income and $5,000 in mortgage interest, you're only taxed on $10,000 (plus other expenses like property taxes, insurance, maintenance, etc.). If you paid cash for the property, you wouldn't have that $5,000 interest deduction, so your taxable rental income would be higher. The actual tax savings depends on your marginal tax rate. If you're in the 22% bracket, that $5,000 deduction saves you $1,100 in taxes. Plus, unlike personal residences, rental property interest isn't subject to the limits of itemized deductions - you get the full benefit regardless.

Does that tool tell you whether you'd benefit from refinancing too? I'm trying to figure out if I should do a cash-out refi to consolidate some debt but I'm worried about losing tax benefits.

I'm kinda skeptical about these tax tools. Do they actually show you how the calculations work or just give you a final number? I've been burned before by "black box" calculators that don't show their work.

It absolutely includes refinancing scenarios! It can compare your current mortgage with refinancing options and show projected tax impacts for both. It considers the new interest rate, closing costs, and how those affect your potential itemized deductions. For your question about transparency - this is actually why I liked it. It doesn't just give you a final number, it walks through each calculation step-by-step and explains which tax rules apply to your situation. You can see exactly how it's determining standard vs. itemized deduction comparisons, and it cites the specific tax code sections it's using for calculations.

How does this service even work? Like, does it call the IRS for you or something? I'm honestly confused how any service could get around the IRS hold times when they're notoriously bad.

Yeah right. No way any service can magically get you to the front of the IRS queue. This sounds like a scam that just takes your money and then you still wait forever. Has anyone here actually used this successfully or is this just marketing garbage?

The service uses a combination of automated dialing technology and optimal call timing to get through the IRS phone system more efficiently. It literally places the call for you and then connects you once it reaches a representative. It handles all the initial menu navigation and waiting periods. The skepticism is totally understandable. I thought the same thing initially. The way it works is that once the service connects with an IRS agent, you get a phone call telling you to pick up because an agent is on the line. I was expecting it to take hours, but got called back in about 20 minutes. The video demo on their site shows exactly how the process works if you want to see it in action.

Can you explain the bunching strategy a bit more? Like give an example with actual numbers? I'm trying to figure out if this would work for my situation.

Sure thing. Let's say you're married filing jointly with a standard deduction of $27,700. Your mortgage interest is $8,000 per year, property taxes are $6,000, and you normally donate $5,000 to charity. Total itemized deductions: $19,000, which is less than the standard deduction, so you get no benefit from your mortgage interest. Now try bunching: In Year 1, donate $10,000 (double your normal amount). Your itemized deductions are now $24,000 (still taking standard deduction). In Year 2, don't donate at all. Your itemized deductions are $14,000, so standard deduction again. But if your mortgage interest and property taxes were higher - say $12,000 interest and $10,000 taxes, your base itemized amount is $22,000. Add $10,000 in donations in Year 1, and you're at $32,000 - now exceeding the standard deduction by $4,300. In Year 2, take the standard deduction. Over two years, you've increased your total deductions compared to taking the standard deduction both years.

I agree on checking your software. I had this same issue with H&R Block's software - it wasn't clearly showing me the threshold calculation. Switched to FreeTaxUSA and it gives a much clearer breakdown of where you stand with itemized vs standard deduction. The comparison feature actually shows exactly how much more in deductions you'd need before the mortgage interest would start benefiting you.

This is such a helpful breakdown! The "locked" analogy really clarifies things. I've been wondering about this same issue and your explanation makes it crystal clear why my mortgage interest isn't helping my taxes right now. One follow-up question - if I'm planning to eventually get a rental property, would it make sense to keep my current mortgage on my primary residence specifically to get familiar with how mortgage interest works as a deduction? Or is the rental property mortgage interest so different that there's no real learning benefit from keeping my primary residence mortgage? It sounds like rental property mortgage interest is much more straightforward since it's just a direct business expense, but I want to make sure I'm not missing any connection between the two situations.

There's really no learning benefit to keeping your primary residence mortgage just to understand how rental property mortgage interest works - they're completely different tax mechanisms. Your primary residence mortgage interest is subject to the itemized deduction threshold we've been discussing. It only helps if your total itemized deductions exceed the standard deduction, and even then, it's limited by various rules (like the $750,000 mortgage debt limit for interest deduction). Rental property mortgage interest is treated as a straightforward business expense on Schedule E. It directly reduces your rental income before calculating taxable profit, with no thresholds or limits to worry about. You get the full deduction regardless of your other tax situation. If anything, keeping your primary residence mortgage when it provides no tax benefit just costs you money in interest payments. That money could be better invested or saved for your future rental property purchase. The rental property mortgage interest will provide clear, immediate tax benefits that you'll see directly on your Schedule E, unlike the "locked" situation with your current mortgage. Focus on paying off your primary residence if it makes financial sense, then when you're ready for rental property investing, you'll get to experience how much more straightforward and beneficial that mortgage interest deduction actually is.

This is really helpful to see someone who actually went through the same decision process! Your point about guaranteed savings versus uncertain tax benefits is exactly the kind of clarity I needed. I'm curious - when you were deciding whether to pay off your mortgage, did you consider any other factors beyond just the tax implications? Like did you worry about losing liquidity or missing out on potential investment returns by tying up that money in home equity? Also, for your rental properties, are you finding that the mortgage interest deduction makes it worthwhile to finance them rather than buying with cash, or are there other factors that influence that decision? I'm trying to think ahead to when I might be ready to invest in rental property.

Great questions! Beyond the tax implications, I did consider liquidity and opportunity cost, but the numbers still favored paying off the mortgage in my situation. For liquidity concerns - I kept a 6-month emergency fund separate from the mortgage payoff, so I wasn't tying up ALL my available cash. The peace of mind from eliminating that monthly payment actually improved my financial flexibility in some ways. Regarding investment returns - this was the trickiest part of the decision. My mortgage rate was 3.8%, so theoretically I could have invested that money and potentially earned more than 3.8% annually. But that assumes consistent returns and doesn't account for the psychological benefit of guaranteed savings. The "return" from paying off my mortgage was guaranteed at 3.8%, while market returns are uncertain. For rental properties, I do finance them rather than paying cash, and the mortgage interest deduction is definitely part of that calculation. But it's not the only factor - leveraging allows me to control more real estate with less capital, and the rental income typically covers the mortgage payments plus provides cash flow. The tax deduction is just an additional benefit that makes the financing even more attractive. The key difference is that with rental properties, you're generating income that can service the debt while building equity, plus you get the tax benefits. With my primary residence, I was just paying interest without any income generation to offset it.

That's such a smart approach, Liam! Your monthly savings calculation really puts it in perspective - $1,850 per month is substantial and can definitely accelerate your path to rental property investing. One thing I'd add from my own experience is to consider setting up automatic transfers for that freed-up money so it doesn't just get absorbed into general spending. I redirected my old mortgage payment ($1,640/month) into a separate high-yield savings account earmarked for real estate investing, and it's amazing how quickly it adds up when you're not seeing that money hit your checking account. Within 18 months, I had enough saved for a down payment on my first rental property, and now that mortgage interest is actually working for me tax-wise. The contrast between getting zero benefit from my primary residence mortgage interest versus seeing real tax savings from rental property mortgage interest has been eye-opening. You're definitely on the right track with this decision!

Great question about the credit score impact! I paid off my mortgage about 8 months ago and did see a small temporary dip in my credit score (maybe 10-15 points) for a few months, but it recovered and is actually higher now than before I paid it off. The temporary dip was likely due to the change in credit mix - losing that installment loan account. However, my credit utilization on credit cards stayed low, and I continued making all payments on time, so the score bounced back relatively quickly. What I found more impactful was that without the monthly mortgage payment, I was able to pay down some remaining credit card balances faster, which improved my utilization ratio and ultimately helped my score more than the mortgage payoff hurt it. The financial benefits (saving $1,750/month in mortgage payments, eliminating interest costs, peace of mind) far outweighed any temporary credit score concerns. Plus, when I did apply for financing on my first rental property about 6 months later, having zero debt on my primary residence actually made me a much stronger borrower in the lender's eyes. I wouldn't let credit score concerns prevent you from making what sounds like a financially beneficial decision in your situation!