Mortgage Killer Accelerator

Strategy 62 of 107

Self-employed: take the home office deduction and send the tax saved to principal

Most predictableFrom new cash flow, not your paycheck

What it is

If part of the home is used regularly and only for your business, you can deduct it.

Steps

  1. If part of the home is used regularly and only for your business, you can deduct it.
  2. The simplified method is $5 per square foot, up to 300 square feet; or use actual expenses.
  3. Send the tax saved to principal.

Repeat: Every tax year.

Measure: Tax saved (enter as a yearly amount).

Try it in the calculator Enter its amount in "Yearly amount to principal". Add a payoff goal of 5 years to see what is still needed.

Risks

  • W-2 employees cannot take this deduction.
  • Using actual expenses can mean depreciation recapture when you sell.

Who it fits

Business owners, Higher earners

Needs

Owns a business or is self-employed

How predictable

Most predictable: once in place, the payoff date is arithmetic

A worked example (hypothetical, not guaranteed)

Picture a hypothetical household (business owners). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.

They follow the steps: if part of the home is used regularly and only for your business, you can deduct it.

Suppose it brings $6,000 once a year on principal. The loan would be paid off in 17 years 11 months instead of 30 years, saving about $173,949 in interest. To finish in five years, they would still need about $3,488 a month more from other strategies. That is why the five-year sequences stack several at once.

The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.

Sequences that use it

Sources and more information

Where to get help

Related strategies

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