 Looking at the income tax formula, we're focused down here at the itemized deductions. Remembering that the first half of the income tax formula is in essence an income statement, although a strange one. We've got the income minus the equivalent of expenses being the deductions, getting down to the equivalent of net income that being taxable income. Everything's topsy-turvy for taxes, meaning we want taxable income as low as possible as opposed to normally when we want net income as high as possible. In prior presentations, we talked about what needs to be included in income. We talked about what might be called the above-the-line deductions or adjustments to income to get to the subtotal of AGI adjusted gross income, an important number because it's the number often used to figure phaseouts for deductions and credits as income levels increase. Then we have the equivalent or what might be called the below-the-line deductions, our focus now, the greater of the standard or itemized deductions. We now focused on the itemized deductions to get us to the taxable income. Looking at page one of the form 1040, we're on line 12, standard or itemized deductions, only taking the itemized deductions when they clear the standard deduction thresholds. Looking at schedule A now, we're focused on the interest paid for the itemized deductions. Now this is one of the big ones and let's just do a quick little recap on it because if you own the home, if you own a home, then likely you have a loan on the home and the interest could be a significant factor in terms of a deductible item on the home. And then the other factor is the property taxes on the home. The combo between those two are usually the big items that could be pushing people over from a standard deduction to an itemized deduction. Now we have to be careful when we talk about the home loan interest because if we're doing tax preparation, it's pretty straightforward. If they paid interest, then we can go through the deductions here. We'll look at the limitations shortly but you often get questions about should I purchase a home, should I purchase or rent for my living conditions? And oftentimes when people talk to professionals in the real estate market, they're talking to mortgage brokers or other individuals, bankers and whatnot that might benefit from issuing a loan. So that kind of makes their opinion a little bit biased and it's easy to kind of overstate sometimes the benefit of the interest paid on a loan. So if you get that kind of question, I would think the general answer would be, well, it depends on the situation. You do get to deduct the interest that you're gonna be paying on the loan but that doesn't necessarily mean that that's always like a good circumstance to do because for example, in this example, we're deducting 17,000 but if that still only barely brought us over the 12,950 standard deduction or the 25,900 and remember the standard deductions were increased a couple of years ago, then it's not gonna give me a whole lot of benefit. See this 24,017 right here for example, if I was dealing with a married couple that had a $25,900 standard deduction, then they wouldn't even be benefiting from it, right? And if this number was just barely over the 25,900, even though they got a $17,000 deduction for the interest that they paid, they didn't get that much of benefit because they barely just cleared the standard deduction which is fairly high these days. So you've gotta really kind of be careful to parse out what you mean by a deduction. So yeah, you get to deduct an itemized deduction up to 17,000 but how much actual benefit has that given you given the fact that you could have taken the standard deduction? How much difference between the standard deduction and itemized deduction is there? So the only way to really determine that with accuracy is to actually do some tax preparation. Now the law and look at the difference. So you actually have run the tax return a few different ways, run the scenario and see what the actual savings are. And so that's something that's useful to be pointing out to clients and it might have an opportunity in some cases for some work with some projection type of analysis from time to time. Now the other thing just to keep in mind with the interest that is paid, it's kind of an unusual circumstance because remember when we're talking about something that's deductible for income taxes you would expect that the things that you had to expend to generate the income would be the natural deductible items as you can see like on a schedule C where we have an income statement and the expenses that you needed to consume to generate the income are business deductions. That makes sense because you wouldn't want to tax people on gross income, but on the net income. However, when we're dealing with individuals who are W2 filers, that means that their employer is the one that is assumed to have taken on those expenses. So we don't have those kind of deductions which kind of leads us to have a weird idea of the kinds of things that should be deductible in an income tax type of system because then the things that start to get deducted are things that are trying to influence our behavior or there's some other kind of rationale for the tax code deducting them like the medical expenses. That's just people just wanted to add the medical expenses because that might help people that have higher medical costs would possibly be the argument. It's possibly also beneficial for the medical industry. Taxes that are paid, it's kind of weird that we deduct personal taxes that are paid. That's kind of a straight like why I don't really know because it's not there. We didn't need to pay the taxes to generate the income and now we're talking about the interest. So if you paid interest for a loan that you then used for the business then the interest might be deductible on the Schedule C which would kind of make sense because you needed to take out the loan. You needed to rent the purchasing power of the money in order to purchase equipment or something or whatever to get the business going. So that would be a natural type of business expense. However, interest paid for the home doesn't seem like it would be a natural business expense because that's a personal item. So this is another kind of weird area of the tax code. Why is it deductible? Possibly because the arguments would be that they want to incentivize home purchases. And so that's kind of the argument to put that on there. Obviously the real estate industry probably has some influence over wanting that to be a deductible component as well. So it kind of confuses things in terms of what kind of interest is deductible because credit card interest is not a deductible item for itemized deductions generally. We talked about student loan. Well, the first 10 million went to pay off student loan. So an interest which might be like an above the line deduction which has a different incentive to incentivize or people educating and obviously again from a pessimistic standpoint that the public school, the education industry, the colleges obviously have a political influence on wanting the loans to be given because they're the ones that are getting the revenue from the loans and so on and so forth. So we've got this weird dynamic of what kind of interest is deductible and it doesn't follow the normal rule that you would expect which would be, you would just have a deduction when it was applicable to the generation of the income. These are deductions for interest that are related to personal kind of items. So that also leads to some worry in terms of the tax code going forward. You can imagine as they did before they increased the standard deduction which actually lowers a little bit of the benefit for the interest payment deduction and obviously the tax code could change more favorably or less favorably going forward. It would be kind of unusual that they would just whip out and pull the rug out from under you by not allowing mortgage interest deductions at all going forward because people are doing long-term planning on it. So even if it wasn't a good idea to add it at the beginning, now that it's entrenched and it's such a long-term planning thing, it would be unlikely I would think that the tax code would just wipe it out completely all of a sudden although, you know, you never know what happens with the tax codes. 20 things happen.