Six of One, Half a Dozen of Another

Scriptures:  Romans 13:6-7; Matthew 22:16-22

If you itemize your federal taxes, did you know that the IRS allows you to deduct $5,000 when you give it to your bank for your mortgage interest or to your church; these both legally lower your tax burden.  Not having a mortgage does not necessarily mean you will pay more taxes.

The Internal Revenue Service creates dozen of rules derived from the laws passed by our government officials; the officials we vote into office.  But none of them are in office apart from God’s Will. And if we believe that God’s Will is to prosper us (Jeremiah 29:11), then there are ways that the government has allowed, and God has sanctioned, for us to benefit from the laws created by our elected officials. And these are the Schedule A (Sch A) deductions of the 1040 federal income tax return. 

The favorite Sch A deduction that most of us who own a home take advantage of each year is to reduce our Adjusted Gross Income (AGI) by deducting the interest for our home mortgage.  We buy our homes knowing that we will enjoy this holy grail of the tax deductions for years to come.  We adopt it like one our children. In fact, many of us hold onto this deduction as if were our precious (you know the magical ring from The Lord of the Rings). We will do anything to hang onto our precious!

When we refinance our homes for lower interest rates – somehow we desire this over eliminating our mortgage all together – we give no thought to reducing the term of the mortgage. But when we do this, we start the amortization schedule and begin paying large amounts of interest anew; losing sight of the fact that all mortgages mathematically frontload interest payments into the first 5 five years of a 30 year term (you only reduce your principal by 11% in the first 5 years but pay 27% of the overall interest liability). So, why would anyone want to keep up this vicious cycle of enslavement?

One of the most freeing moments in your life is when you pay off your mortgage.  Our parents often celebrated this event by having a mortgage burning party!  So, why don’t we hear about these parties today?  My contention is that we have all been blinded by the myth that we need a mortgage as the only significant way to reduce our tax burden.

Now, don’t get me wrong, I am not against mortgages in order to put a roof over your head.  All that I am suggesting – and recommending – that we all strive to eliminate our debt burden by having a solid plan to shorten the term of our mortgage.  It can be done. And there are still ways to reduce your tax burden without a mortgage interest payment.

Another IRS-approved AGI reducing deduction we take advantage of on the Sch A is the charitable deduction. And just like the mortgage interest deduction, for every $10,000 you donate to a charity, you receive a $2,500 reduction in your tax bill.  If an organization is designated as a 501(c)3, a non-profit charitable organization, then donations made to these organizations are deductible.  So, you see, there is still a way to preserve the precious tax deduction because as far as the IRS is concerned the tax reducing benefit is six of one, half a dozen of another.  The difference from our perspective, however, is who benefits from receiving the $10,000. 

Therefore, one thought I want you to consider is this – If you were going to invest $10,000 where the dividends could benefit God’s Kingdom and his people, where would you invest that money?

If you desire to make bigger investments into God’s Kingdom, then establish and begin executing a plan to eliminate your debt, including your mortgage.