Paid Off Mortgage and Tax Ramifications

1 Reply


I have a rental property in NY that is being managed by a pro and cash flowing nicely. At one time it was my primary residence and the mortgage is almost paid off. I'd like to pay off the mortgage and really enjoy the cashflow but would this trigger a spike in how the house is taxed?

Should I re-mortgage the property and buy another rental property here in Florida or can I just enjoy this extra cashflow without "the man" getting any more than the ample amount of property taxes I'm already paying?

Thank you all in advance!

@Anthony Mikolich you get a deduction for the mortgage interest that you are paying, not the principal so taxes will likely go up very slightly because of the mortgage being paid off.

If you've the house as a rental for 27.5 years (mot including the primary residence years), the depreciation of the house will be complete and taxes likely will go up. This could coincide withe mortgage payoff say on a 30 year mortgage (2.5 year primary residence, 27.5 year rental) but are unrelated.

Should you refinance and purchase another is a personal decision. Do you want another property with all the benefits (cash flow,appreciation, depreciation) and all the headaches (tenants, repairs etc.)? Are you trying to achieve a personal goal where another property will help you get closer to?