Question about using fund to pay mortgage

[Tadpole]

We owe $18,000 on my mortgage. My husband suggested that we sell a mutual fund to pay off the mortgage. The fund is worth approximately what it was bought for in 1996 ($20,000). This was an after-tax purchase. If we did this, he would be able to maximize his retirement contributions, do catch-up and reduce our taxes. It makes sense to me but I am always afraid there is something I do not know. Will I owe taxes on the fund if it earned no money? Is this a good idea?

 

[Jarhead*]

We owe $18,000 on my mortgage. My husband suggested that we sell a mutual fund to pay off the mortgage. The fund is worth approximately what it was bought for in 1996 ($20,000). This was an after-tax purchase. If we did this, he would be able to maximize his retirement contributions, do catch-up and reduce our taxes. It makes sense to me but I am always afraid there is something I do not know. Will I owe taxes on the fund if it earned no money? Is this a good idea?

If you purchased your fund in 1996, and it is worth about the same today, you would probably qualify for a long term loss. (Outside of a qualified plan, you would have been paying dividends & Cap Gains as you went along).
Regards, Jarhead

 

[windedhare]

Looks like three birds with one stone:
-mortgage free
-reporting a loss on the sale should reduce income tax liability
-more income available to direct towards tax favored savings

As long as there are other liquid funds availabe in case an unexpected emergency arises, I wouldn't hesitate.

 

[Tadpole]

Thanks, you guys are the best. I have been one of those inadequate visitors (reading, not posting) for awhile.

Sigh, how do I know if I have a "qualified" plan?

 

[windedhare]

Sigh, how do I know if I have a "qualified" plan?

Qualified is analogous to tax-deferred. ie. 401K, IRA, etc.