Tax Law: Should You Pay Off Your Mortgage?
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Your Money Briefing. Money and market stories from The Wall Street Journal. I'm J.R. Whalen in New York. The new tax law means it could be a good time to pay off your mortgage entirely. We'll explain the pros and cons in a moment. First, these money headlines. Despite rising gas prices, SUVs and pickup trucks accounted for about 67% of auto sales in May. That's according to JD Power, and it's the highest level ever for the month of May. A richer mix of SUVs and pickup trucks, which carry higher prices than passenger cars, drove the average transaction price up nearly $1,200 in May compared to last year, while discounts remained flat at about $3,665 per vehicle. At the pump, regular gasoline surpassed an average of $2.90 a gallon nationally last week,
and prices are expected to continue to rise and could top $3 a gallon through the summer driving season. The Service Employees International Union has sent text messages to 800,000 members as part of a program that includes meeting with workers and sending mailers to homes. It comes as organized labor braces for a Supreme Court ruling that could make it easy for public sector workers to stop paying some dues. Unions across the country are reaching out to hundreds of thousands of members to persuade them to keep paying dues. The pending Supreme Court case was filed by a child support worker in Illinois against the American Federation of State, County, and Municipal Employees. The worker said bargaining with public agencies is inherently political, and a mandatory $45 a month fee paid to the union violates his First Amendment rights.
A Supreme Court ruling in his favor could allow an estimated 5 million government workers in 22 states to stop paying so-called agency fees. That's the portion of union revenue that funds collective bargaining. Workers have the right in all states to decline union membership or pay full union dues. This is your money briefing from The Wall Street Journal. Welcome back, everybody. 32 million tax filers got a mortgage interest deduction in 2017. But under the changes ushered in by the new tax law, that number drops to 14 million tax filers.
How will the new tax law change who claims the mortgage interest deduction?
And that raises the question, should you think about paying off your mortgage now if you lose the opportunity to enjoy a sizable tax write-off? And when a question like that comes up, we bring in Wall Street Journal tax reporter Laura Saunders. So, Laura, for a lot of people, this deduction results in some significant cash when they get their tax refund.
Well, yes, it goes into all the deductions and exemptions, and all of that has changed. And we talked to experts in this area who said that the changes in the mortgage interest deduction really strengthen the arguments for paying down or off a mortgage for a whole lot of people. Now, that will surprise people because this is kind of a cherished cornerstone of deductions. You know, it helps homeowners. But they've made changes that make paying off or down your mortgage maybe an interesting way to go.
The near doubling of the standard deduction plays a key role in what taxpayers would decide to do regarding their mortgage.
Yes, this is important because it's not really a limit on the mortgage deduction itself. It's an indirect limit. limit, a change. There's this thing called a standard deduction. That's what you take if you don't fill out Schedule A, which has your mortgage, your charity, your medical, things like that. And the standard deduction nearly doubled for everybody. For individuals, it goes to $12,000. For married couples, it goes to $24,000. And so millions of fewer people will be filling out that Schedule A form with mortgage interest deductions. Now, they'll get a bigger standard deduction, but it means that the mortgage interest deduction has less relative value than it used to. It doesn't say anything about whether your taxes are going up or down.
It's just this one provision has less relative value for many people.
And then the cap on deducting state and local property taxes, that comes into play also.
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