Financial Questions regarding Coronavirus – (Q & A)

Jun 2020


  Dear Rick:

 I have a couple questions I hope you can help me with.  Since the Coronavirus has shut everything down, I have been working out of my house.  In fact, my boss told me I’ll be at home at least through the summer. My husband is self-employed and we have a room in our house that is dedicated just for his business.  At tax time, we can deduct a variety of expenses related to my husband’s home office.  My first question to you is what expenses will I be able to deduct, and what sort of receipts should I be saving?  My next question relates to my mortgage.    We still have a 6½ percent mortgage that we should have refinanced a few years ago.  Last year, we did not deduct the interest because we did not have enough of other deductions.  My husband thinks that since we have the money in the bank, we should pay the mortgage off-that is are only debt, and he would love to be debt free.  My husband and I plan to work for at least another 15 years, and we have a substantial amount of money saved for our retirement.  If we don’t pay off the house, we’ll probably just leave the money in the savings account.

Thank you.


Dear Diana:

Unfortunately, as an employee, are not eligible to deduct home/office expenses.  Your husband, on the other hand, is not an employee but rather, self-employed and the rules regarding deductibility of home offices for a self-employed individual are totally different.  For a self-employed person, if they use part of their home exclusively and regularly for business purposes, and it is either the main location of the business, the place where they meet clients or customers, or it’s a separate structure, they can deduct some home office expenses.  Once again, you being a W-2 employee are basically precluded from a home office deduction.

With regards to the home, I don’t have a problem with you using your excess cash to pay off the mortgage.  After all, the money in the bank is probably getting about one percent in interest and that money is taxable. In comparison, you are paying 6½ percent on your mortgage. It is a slam dunk to pay off your mortgage!  Of course, it is important to make sure that after you pay-off your mortgage you still have enough in the bank for an emergency fund of money (typically 3-6 months of living expenses).

Now that you’ve paid off your mortgage, let’s address your extra savings. I think you should consider investing in Roth IRA.  This would give you the opportunity to invest tax free and not be subject to the minimum required distribution rules at age 72.  Investing money in a Roth IRA, if you’re eligible, is a much better alternative than accumulating money in the bank.  If nothing more, a Roth IRA grows tax free while your money in the bank is taxable.

One last note and that is many people think that with interest rates so low paying off their house is not necessarily a good investment.  I disagree.  Particularly, since the majority of people can no longer deduct their mortgage interest, paying off your mortgage does make sense financially, especially, for a conservative investor who is otherwise leaving their money in the bank.   Paying off your mortgage is a much better alternative than leaving the money in the bank at very low interest rates, not to mention in the case at hand, as the husband wants to be debt free.  Also, let’s not forget that it is a good feeling to have your house paid in full, and isn’t that what money is supposed to bring you?

Good luck!


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