[quote flu]Not going to happen either. Simply because the IRS does not have the bandwidth to go through the details of every person’s financial situation and figure out how a heloc was used, or a cash out refinance was used.[/quote]
The IRS is increasing their bandwidth. They are now using systems that can ‘read’ and ‘process’ the forms for tax ‘mistakes’. Its not perfect, but it is getting scary.
What the IRS may do is make the interest from an HELOC non-deductible as a default unless you can prove by receipts that the money was spent on improvements to the property. Only the interest on the principal that can be justified by receipts would be allowed.
As for cash-out refi, that would be easier. The interest on the amount that is cashed-out would not be deductible unless there are home improvement receipts for that amount.
[quote joec]Yeah, your idea sounds much better than renting someone else’s house. :)[/quote]
It was from my primitive understanding of how the wealthy were getting around the system before the home mortgage interest deduction was allowed.
[quote meadandale]I love how they always talk about how much these things are ‘costing’ the government. It’s not costing the government ANYTHING to give this deduction to home owners–it just means that they can’t collect that much additional tax.[/quote]
Actually it just shifts the tax burden, unless the gov. reduces spending(yeah, right). The total bill has to be paid eventually anyway. You can shift it to different parts of the population, or you can ‘time shift’ it using treasuries (fed borrowing).
