Taxes on my mortgage deal??
we owe 250,000
current interest rate is 6.75%
28 more years to go
scheduled interest rate should be 8.75%, effective this month
the deal being offered -- 5.25% interest for 5 years, after which it returns to the scheduled (ARM) rate.
effect on payment:
a) at 8.75% payment is
b) at 5.25% payment is
difference of 3.5% or 8750/yr [if it was interest only]
Data: I'm not paying anything for this deal. Obviously, my mortgage interest deduction will be about 8750 per year lower on my taxes [yes, we itemize -- if AMT doesn't get us]
Question: is the 43750 I'll save by agreeing to this taxable income to me? If so, when do I have to report it and pay the tax?? [it's almost enough all by itself to push us into the AMT if I have to report it all in one year.]
thanks for the help, guys
[citations to IRS rules and forms very helpful]