The Mortgage Interest Deduction

[ivwshane]

I don't agree.

First I abhor blurring language/terms for political points.

But our income tax system is based on net income. Deductions are not "subsidies", but instead are necessary to arrive at net income. A tax on gross income would be unconstitutional.

Granted, politicians have polluted our net income tax system and have allowed for some illogical deductions in hopes of incentivizing some behavior (or rewarding lobbyists, depending upon you POV). Heck, they may even want to subsidize something. But technically a deduction is a necessary item in arriving at net income.

Fern

Sorry, yes I did not use "deduction" in the correct way but I think you understood my point.

 

[BoomerD]

I don't have much of a problem with the MIT on the primary residence...but it should be capped at ONE deduction per person/couple...and only on a fixed house, NOT a motor home, boat, travel trailer, etc.

Currently you can deduct the mortgage interest/property taxes from up to two homes, and neither of them have to be a "house."

For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.

 

[DCal430]

I don't have much of a problem with the MIT on the primary residence...but it should be capped at ONE deduction per person/couple...and only on a fixed house, NOT a motor home, boat, travel trailer, etc.

Currently you can deduct the mortgage interest/property taxes from up to two homes, and neither of them have to be a "house."

Well it is still subject to 1 million total limit for all homes combined, so you can't deduct it on two 600,000 homes fully.

 

[highland145]

Depends. Are we talking about a simpler tax code? Are others giving up their deductions as well? Then sure. If I'm being asked to give up my small part while those who earn much more than I do continue to rake in higher deductions and pay a lower effective tax rate by itemizing, then no.

We're venturing into a broader topic with such discussions, though. There are plenty of wealthy people who pay lower effective tax rates than those in the middle class. I don't think this is disputed.

Edit: Sorry, my quote missed your "Put up or shut up" Thanks for adding that Clearly your challenge is going to require me to "put up", since none of these deductions are going away any time soon. Shall I write a check to the Treasury and post in online in the hopes that everyone else in the country does the same to prove myself to you?

Not at all. The point is if I'm paying $5k in interest as a home owner and taking that as a deduction (plus paying all of the supporting local taxes and home expenses) vs you taking the standard deduction, renting. You're not adding anything but still getting your "greater benefit."

Why should you get a deduction at all? But you are.

Add in the AMT and the IRA income cap for those over $200K(?), looks like I need an offshore tax haven. ..If I made more than $200K.


Not my intention to ninja edit you earlier.

 

[Slew Foot]

It's not a subsidy at all. A subsidy would be a tax credit. This is nothing more than a deduction that benefits society as a whole.

If you want to take advantage of the deduction then buy a home. If you really want to smash this economy into the shitter, one very simple way to do it would be to eliminate the mortgage interest deduction (which obama has stated he wants to do).

To make a comparison, is the deduction of tuition and education related expenses a "subsidy" or more like an "incentive"? Same with the mortgage interest deduction, it's an incentive and not a subsidy.

I maxed out my mortgage right at jumbo limit and then another 100k HELOC all because of the deduction and incredibly low rates.

There's a reason I took out a $999,999 mortgage

 

[CLite]

But if you buy no home you get the standard deduction for doing nothing to boost the housing market/economy/local tax base and, depending on your income, yet can get free $$ for your kids because you had sex. Not fair, I say, cut out all deductions/credits. Let 'em eat cake.



Full disclosure: I don't have a mortgage.

If OP reads about standard deduction this thread does not get made.

Everyone who pays federal taxes gets a completely "subsidized" deduction. If you buy a house and the interest payment/prop tax deduction does not exceed your "subsidized" standard deduction then of course buying a home does not help your taxes. If you buy a house and the interest payment/prop tax deduction does exceed the standard deduction then your itemized deduction now becomes primary.

As a single apartment dweller the OP is enjoying a deduction for simply living, he should think about that while "ranting" about itemized deductions.

 

[Gunslinger08]

I would be fine with removing deductions and credits from the tax code. I don't really think the government needs to be in the business of incentivizing personal choices through taxes.

This of course would need to go along with a sharp decrease in tax rates.

 

[Balt]

Not at all. The point is if I'm paying $5k in interest as a home owner and taking that as a deduction (plus paying all of the supporting local taxes and home expenses) vs you taking the standard deduction, renting. You're not adding anything but still getting your "greater benefit."

Why should you get a deduction at all? But you are.

Add in the AMT and the IRA income cap for those over $200K(?), looks like I need an offshore tax haven. ..If I made more than $200K.


Not my intention to ninja edit you earlier.

If you want to make the argument that there shouldn't be a standard deduction, that's fine. If I'm of the opinion (and I am) that the MID should be removed or at least scaled back for higher incomes so that it can help those with lesser means more, I'd have to be willing to do the same with the standard deduction for the sake of consistency.

The standard deduction was a great help back when I was a student earning very little. These days, I probably wouldn't starve without it.

 

[spidey07]

It is phased out after 100k income I believe. I don't know where it's completely phased out though.

 

[OILFIELDTRASH]

I pay closer to 5k a year in property taxes. If I get an extra $200 at the end of the year back I consider it a small bonus since it's homeowners like myself that pay for the streets and parks in the neighborhood you enjoy and don't pay shit for.

 

[spidey07]

Property taxes are built into the rent. He does pay albeit indirectly.

Thankfully i will deduct some 30k in interest and property tax.

 

[Balt]

I pay closer to 5k a year in property taxes. If I get an extra $200 at the end of the year back I consider it a small bonus since it's homeowners like myself that pay for the streets and parks in the neighborhood you enjoy and don't pay shit for.

Wrong, but thanks for playing.

It is phased out after 100k income I believe. I don't know where it's completely phased out though.

Hmm, I haven't seen any indication of this so far, but I'll look into it.

 

[DCal430]

Wrong, but thanks for playing.




Hmm, I haven't seen any indication of this so far, but I'll look into it.

As far as I know the only phase out is 500,000 debt limit for individuals and 1 million for married couples.

So a non married person who purchases a 800,000 home with 700,000 mortgage will only be allowed to deduct 71% of the interest. If he owns a second vacation home worth 350,000. He will be able to deduct 0% of the second home.

So for his two homes he will only be able to deduct less than 50% of his total interest on both properties.

 

[piasabird]

A House can be just a giant money pit.

With an apartment you have no rights if the owner sells the property, goes bankrupt, or dies. There are other drawbacks for home ownership. Usually if you buy a house there is a huge downpayment and closing costs ($5000 or more). Plus most lenders will add a monthly amount to pay for Insurance for fire/theft/liability required to get the loan. Also there are tons of general maintenance costs like New water heaters, replacing the roof, Paint, Lawn Maintenance, surfacing the driveway, Fence Repair, Heater and air Conditioning repair, new stoves and Refrigerators, new windows, etc.

My house is valued at $85,000. I dont see how anyone can afford a $800,000 house. You would need an income about $200,000 a year.

 

[Doppel]

I deduct a good bit each year and really the whole thing is a bit stupid. All it does is inflate the cost of a house.

 

[spidey07]

Doesnt inflate home costs at all. The price the home sells for is what the buyer is willing to pay. Doesn't matter if they pay cash or use a loan.

Plenty of people buying up houses for investment with cash right now.

 

[piasabird]

Why does a home have to be a house? Some people around seatle live on houseboats.

 

[DucatiMonster696]

Why does a home have to be a house? Some people around seatle live on houseboats.

Instead of house just use the word "property" and you'll arrive at the same place in the end.