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About John Stancil, CPA
Expertise
I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I teach tax and accounting at a small church-related college. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a part time tax practice for over 30 years. I am a member of the AICPA, National Association of Tax Professionals, and the Institute of Management Accountants. Visit my website at www.johnstancilcpa.com. Also visit my blog, www.thetaxdocspot.com.

Experience
I hold a doctorate in Accounting, and four professional certifications: CPA, CMA, CFM, and CIA. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I write a monthly tax column for the local newspaper. I have prepared taxes for over 30 years.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill College

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Tax Law (Questions About Taxes) - home purchase

Expert: John Stancil, CPA - 11/1/2009

Question
John, we are going to be buying a new home in 2010. The purchase price will be around $225,000. We will have around $340,000 of qualified (tax-deferred) and $30,000 non-qualified money available to us. We do not plan to need any of the above money for living expenses, beyond the home purchase. We know that we will have to pay income tax on the qualified money as we spend it. From an income tax standpoint, are we better off to get a short term mortage and pay for the home over a few years or pay cash for the home?

Answer
Harv,

Thanks for your question.

You need to evaluate the return on your investment as compared to the interest rate you would be paying on the mortgage.

Assuming you are in the 25% bracket, a 6% rate on the mortgage would equate to a 4.5% after tax cost. (Interest rate/1 - tax rate).

If you think your retirement (and other funds) can earn at least 4.5% (using my numbers) then you should secure a mortgage. If you don't anticipate a return of 4.5% on those monies, then pay cash.

Hope this helps.

John Stancil, CPA

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