[quote=FormerSanDiegan]What I find interesting about this proposal is that on the surface they expect to get additional revenue, based on people’s mortgages today. However, if this tax law changed, don’t you think those affected would make changes ?

For example, one could choose to rent a similar property, and hold their existing house as a rental. A rental property is taxed as a business and the mortgage interest is a business expense. Getting rid of business expenses will be a much harder sell than limiting primary residence mortgage interest deduction.

If this change is made, people will adapt and there will be other unintended consequences. For example, higher end property values could decline significantly, resulting in lower property taxes and less money in Local/state Government coffers. SO, it’s likely that the long-term net result would be equivalent to the Federal Government taking funds from state/local governments.
It’s even possible that the net effect after taking into account people’s obvious response to lower their tax burden would be fewer dollars net going into government hands.[/quote]

I think you are right FSD. If this law is phased in, I believe that there will be a far lower percentage of resident owners and a lot more rental properties, whether owned by lenders, REITs or individuals who didn’t want to or couldn’t sell.

If this law gets completely phased in before I turn 59.5, I will attempt to sell my property. If I can’t get at least 90% of my own investment back out from sale, then I’ll just retire the loan at that time. If I desire to move, I’ll just rent it out indefinitely and deduct it from my taxes by depreciating it and go rent somewhere.