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From: ask@cbdkc1.UUCP (A.S. Kamlet)
Newsgroups: net.invest
Subject: Re: A penny saved...
Message-ID: <1166@cbdkc1.UUCP>
Date: Tue, 8-Oct-85 15:54:38 EDT
Article-I.D.: cbdkc1.1166
Posted: Tue Oct  8 15:54:38 1985
Date-Received: Wed, 9-Oct-85 11:47:11 EDT
References: <161@aplvax.UUCP>
Reply-To: ask@cbdkc1.UUCP (A.S. Kamlet)
Followup-To: <33700010@hp-pcd.UUCP>
Distribution: na
Organization: AT&T Bell Laboratories, Columbus
Lines: 23

> < I've been adding an extra $100 to my mortgage payment every month.  Ignoring
> < taxes, this is the same as investing this money at 12.5% (my mortgage rate).
> <
> Normally ignoring taxes is about as smart as ignoring a warning letter from
> the IRS, but in this case it doesn't make much difference. If you pay an
> extra $100 to the bank then you save $12.5 a year in interest and lose 
> $12.50 a year in deductions. That leaves you with the same amount as if
> you invested at 12.5% and paid taxes on that. If you are in a high enough

In Ohio, state income tax is figured on gross federal income less
items that the state does not tax, such as U. S. bond interest, and
a few other deductions.   Ohio does not allow you to take most deductions,
specifically interest payments on homes or car loans!

So, if you earn $12.5 in interest and have an expense of $12.5, while you
break even on that for federal tax purposes, you end up paying taxes on
the $12.5 to Ohio.   I don't know what other states do.

> tax bracket then you might do better with tax exempt bonds but there are
> very few places where you can buy bonds( or any other high yield investment)
> in $100 increments.
-- 
Art Kamlet  AT&T Bell Laboratories  Columbus {ihnp4 | cbosgd}!cbrma!ask