You don’t get a mortgage interest deduction for speculation homes (IE your investment property(ies)) …
MID applies to primary homes and vacation homes, as long as you stay within the 1.1 million threshold.
Interest related to “investment property” fall under “investment expense” (schedule E)…It’s no different than any any sort of investment expense that you can report either for property or for other investments for that matter…It’s considered cost of doing business….No different than other expenses related to investment properties (repair costs, upgrade costs,etc,etc,etc)…
Even taking a loan out on your primary and using it for investments is considered investment expense.. You don’t deduct it on Schedule A if you were to do that… If instead you were to use borrowed money to invest on other things (stocks/mutual funds) that would fall under investment expense for stocks/mutual funds (not suggesting one should do that necessarily)…[/quote]
Right, I don’t think flippers should be able to deduct mortgage interest (or any expenses) when flipping homes, nor should they have access to any govt-backed/GSE loans. I get that they don’t usually deduct the mortgage interest in the same way that a primary owner/landlord does, but they do get to deduct it upon sale of the property. IOW, I think that there should be a *disincentive,* through the tax code and govt mortgage industry, to flipping homes.
“Investors” who buy existing homes to rent should also not get the MID in my ideal world. I totally understand the logic behind deductible expenses for business, but don’t think that buying up SFHs in areas where there is a high demand for this for-sale housing from organic/end buyers who are looking to buy a primary home is “running a business.” I’d rather see families — who are looking for a primary residence — have access to affordable homes that can be purchased with very conservative, traditional mortgages.
Again, I’m likely in the minority of one, but I have strong feelings about speculators and investors being in markets for basic necessities. Yes, I get that rental housing is still housing, but think that society is best served when the greatest possible number of people are in control of their own housing (stronger communities, lower crime rates, better maintained neighborhoods, etc.), and can benefit from owning a real asset and having a paid-off house upon retirement. I strongly dislike feudal societies and think we need to do everything in our power to prevent the concentration of power/wealth.[/quote]
Wait.
1. First of all, I thought flippers traditionally are cash buyers, no? At least they have to be if we’re talking foreclosures….
2. Even if they were to take out a loan, it wouldn’t be reported as mortgage interest deduction on schedule A. Again it would be investment interest expense on schedule E.
3. Flippers that take out a loan to flip a specific property isn’t paying *that* much interest anyway if the flip is really a flip. Maybe 1-3 months?
4. And I have a question. How can you tell a flipper from a non flipper/investor?
Seems to me you’re just asking for arbitrary restrictions on investments and or speculation…
So let me get this straight.. You’re suggesting that someone that speculates and earns money should be taxed for income. But someone that speculates and loses money should eat the costs…
How is this different from the reverse of this scenaro: a bank that earns money keeps the profits, but a bank that takes heavy losses, the government and taxpayer ends up picking up for the loss (sound familiar)?
And let’s take this one step further. Why stop at just flipping houses? Why not make this rule apply to all investments, including money you put into bonds, stocks, mutual funds, everything…
Everytime you earn a profit, you pay taxes on it. Every time you lose money, you can’t use it to offset your gain… That would also “discourage” speculation, (as well as sound investing) would it? When was the last time you lost money on a bad debt or bad investment? Did you write it off or not? Or have you had a perfect track record of never losing any money on any of your investments?
Seems to me, in the suggestion you are making, it’s government wins if you profit, government wins if you lose.
Uh, ok… I’m glad you’re not a politician and I’m glad this idea is not very popular…
