Ax may fall on tax break for mortgages

[(former)FormerSanDiegan]

[quote=flu][quote=FormerSanDiegan][quote=flu][quote=mike92104]I could support losing the tax credits for second homes. It amazes that that no one ever thinks about spending less money.[/quote]

What tax credits on second homes? I thought the mortgage interest rate deductions only apply the the first. At least, when it comes to AMT calculations.

Maybe I’m wrong. Enlighten me please.[/quote]

The regular tax code allows deduction of mortgage interest on both a primary residence and a second (e.g. vacation) home used for personal use (as opposed to rental property).

http://www.irs.gov/publications/p936/ar02.html

Not sure how a mortgage on a second home is treated for AMT. But, I suppose the majority of second home owners are subject to AMT.[/quote]

So I’m enlightened. Actually, I think AMT allows for deduction on the second too. My bad.[/quote]

You are right that AMT allows for deduction on the second home (but there are limits on second mortgages); unless the second “home” is a boat or trailer (which actually count as second homes under regular tax code and certain limitations, e.g. the boat has to have some sort of kitchen).

[briansd1]

[quote=FormerSanDiegan]
briansd1 –
I never calculated what my threshold for ownership premium, but I do know this:
If the interest on my Jumbo mortgage is no longer deductible, I will turn my primary into a rental property and rent somewhere else.

I suspect there would be similar activity by others with similar means and similar math skills.[/quote]

In a perfectly rational world perhaps many other will do the same….

But in a world full of animal spirits, try getting the housewife to move to a rental.

How about “throwing away” all the customization that makes a house home?

[briansd1]

[quote=FormerSanDiegan]
briansd1 –
I never calculated what my threshold for ownership premium, but I do know this:
If the interest on my Jumbo mortgage is no longer deductible, I will turn my primary into a rental property and rent somewhere else.

I suspect there would be similar activity by others with similar means and similar math skills.[/quote]

In a perfectly rational world perhaps many other will do the same….

But in a world full of animal spirits, try getting the housewife to move to a rental.

How about “throwing away” all the customization that makes a house home?

[briansd1]

[quote=FormerSanDiegan]
briansd1 –
I never calculated what my threshold for ownership premium, but I do know this:
If the interest on my Jumbo mortgage is no longer deductible, I will turn my primary into a rental property and rent somewhere else.

I suspect there would be similar activity by others with similar means and similar math skills.[/quote]

In a perfectly rational world perhaps many other will do the same….

But in a world full of animal spirits, try getting the housewife to move to a rental.

How about “throwing away” all the customization that makes a house home?

[briansd1]

[quote=FormerSanDiegan]
briansd1 –
I never calculated what my threshold for ownership premium, but I do know this:
If the interest on my Jumbo mortgage is no longer deductible, I will turn my primary into a rental property and rent somewhere else.

I suspect there would be similar activity by others with similar means and similar math skills.[/quote]

In a perfectly rational world perhaps many other will do the same….

But in a world full of animal spirits, try getting the housewife to move to a rental.

How about “throwing away” all the customization that makes a house home?

[briansd1]

[quote=FormerSanDiegan]
briansd1 –
I never calculated what my threshold for ownership premium, but I do know this:
If the interest on my Jumbo mortgage is no longer deductible, I will turn my primary into a rental property and rent somewhere else.

I suspect there would be similar activity by others with similar means and similar math skills.[/quote]

In a perfectly rational world perhaps many other will do the same….

But in a world full of animal spirits, try getting the housewife to move to a rental.

How about “throwing away” all the customization that makes a house home?

[briansd1]

[quote=FormerSanDiegan]

The interest deduction on a 800K loan is something like 48K per year (at 6%). For someone making 250K per year, that amounts to a deduciton worth somewhere in the neighborhood of 19K.

I personally believe that 19K per year increase in costs is relevant to people who make ~ 250-300K. This will reduce the amount households in the 200-400K income can afford to pay for housing and thus will significantly impact the price of housing in the categories that these people buy.
[/quote]

Let’s assume for a moment that what you said is true.

The Federal government collects $19k more in taxes.

For property taxes, $19k at 1.1% equates to a property value of $1.7 million. How much would value your example house lose in value?

The federal and state governments would increase revenue more than local government would lose in property taxes.

[briansd1]

[quote=FormerSanDiegan]

The interest deduction on a 800K loan is something like 48K per year (at 6%). For someone making 250K per year, that amounts to a deduciton worth somewhere in the neighborhood of 19K.

I personally believe that 19K per year increase in costs is relevant to people who make ~ 250-300K. This will reduce the amount households in the 200-400K income can afford to pay for housing and thus will significantly impact the price of housing in the categories that these people buy.
[/quote]

Let’s assume for a moment that what you said is true.

The Federal government collects $19k more in taxes.

For property taxes, $19k at 1.1% equates to a property value of $1.7 million. How much would value your example house lose in value?

The federal and state governments would increase revenue more than local government would lose in property taxes.

[briansd1]

[quote=FormerSanDiegan]

The interest deduction on a 800K loan is something like 48K per year (at 6%). For someone making 250K per year, that amounts to a deduciton worth somewhere in the neighborhood of 19K.

I personally believe that 19K per year increase in costs is relevant to people who make ~ 250-300K. This will reduce the amount households in the 200-400K income can afford to pay for housing and thus will significantly impact the price of housing in the categories that these people buy.
[/quote]

Let’s assume for a moment that what you said is true.

The Federal government collects $19k more in taxes.

For property taxes, $19k at 1.1% equates to a property value of $1.7 million. How much would value your example house lose in value?

The federal and state governments would increase revenue more than local government would lose in property taxes.

[briansd1]

[quote=FormerSanDiegan]

The interest deduction on a 800K loan is something like 48K per year (at 6%). For someone making 250K per year, that amounts to a deduciton worth somewhere in the neighborhood of 19K.

I personally believe that 19K per year increase in costs is relevant to people who make ~ 250-300K. This will reduce the amount households in the 200-400K income can afford to pay for housing and thus will significantly impact the price of housing in the categories that these people buy.
[/quote]

Let’s assume for a moment that what you said is true.

The Federal government collects $19k more in taxes.

For property taxes, $19k at 1.1% equates to a property value of $1.7 million. How much would value your example house lose in value?

The federal and state governments would increase revenue more than local government would lose in property taxes.

[briansd1]

[quote=FormerSanDiegan]

The interest deduction on a 800K loan is something like 48K per year (at 6%). For someone making 250K per year, that amounts to a deduciton worth somewhere in the neighborhood of 19K.

I personally believe that 19K per year increase in costs is relevant to people who make ~ 250-300K. This will reduce the amount households in the 200-400K income can afford to pay for housing and thus will significantly impact the price of housing in the categories that these people buy.
[/quote]

Let’s assume for a moment that what you said is true.

The Federal government collects $19k more in taxes.

For property taxes, $19k at 1.1% equates to a property value of $1.7 million. How much would value your example house lose in value?

The federal and state governments would increase revenue more than local government would lose in property taxes.

[SK in CV]

[quote=FormerSanDiegan]

The interest deduction on a 800K loan is something like 48K per year (at 6%). For someone making 250K per year, that amounts to a deduciton worth somewhere in the neighborhood of 19K.

I personally believe that 19K per year increase in costs is relevant to people who make ~ 250-300K. This will reduce the amount households in the 200-400K income can afford to pay for housing and thus will significantly impact the price of housing in the categories that these people buy.

Regardless of the mechanism, it is naive to believe that the Government will recover the amount of dollars they anticipate by enacting this change. People will react and adapt to the changes in a way that reduces the overall take of the government.

I don’t disagree that in the long run the removal of this subsidy would make the economy more efficient, it’s just that the reaosn for doing so (to generate more revenue for the Government) may not come to pass.[/quote]

No disagreement. It will affect the lifestyles of people in that income bracket. Phased in over a 10 year period, they’ll learn to live with it. I think the net effect on housing values will be slight. We’ll see larger downpayments. More shorter loans. People in that income bracket should be able to pay off a loan much faster than 30 years.

And I think you may have misunderstood something I said, maybe I didn’t explain it well enough. This would be a good revenue-neutral tax change. Rates could be lowered to account for the elimination of the deduction. (As opposed to phasing out the deduction only for higher income taxpayers, which would be a revenue increase.)

[SK in CV]

[quote=FormerSanDiegan]

The interest deduction on a 800K loan is something like 48K per year (at 6%). For someone making 250K per year, that amounts to a deduciton worth somewhere in the neighborhood of 19K.

I personally believe that 19K per year increase in costs is relevant to people who make ~ 250-300K. This will reduce the amount households in the 200-400K income can afford to pay for housing and thus will significantly impact the price of housing in the categories that these people buy.

Regardless of the mechanism, it is naive to believe that the Government will recover the amount of dollars they anticipate by enacting this change. People will react and adapt to the changes in a way that reduces the overall take of the government.

I don’t disagree that in the long run the removal of this subsidy would make the economy more efficient, it’s just that the reaosn for doing so (to generate more revenue for the Government) may not come to pass.[/quote]

No disagreement. It will affect the lifestyles of people in that income bracket. Phased in over a 10 year period, they’ll learn to live with it. I think the net effect on housing values will be slight. We’ll see larger downpayments. More shorter loans. People in that income bracket should be able to pay off a loan much faster than 30 years.

And I think you may have misunderstood something I said, maybe I didn’t explain it well enough. This would be a good revenue-neutral tax change. Rates could be lowered to account for the elimination of the deduction. (As opposed to phasing out the deduction only for higher income taxpayers, which would be a revenue increase.)

[SK in CV]

[quote=FormerSanDiegan]

The interest deduction on a 800K loan is something like 48K per year (at 6%). For someone making 250K per year, that amounts to a deduciton worth somewhere in the neighborhood of 19K.

I personally believe that 19K per year increase in costs is relevant to people who make ~ 250-300K. This will reduce the amount households in the 200-400K income can afford to pay for housing and thus will significantly impact the price of housing in the categories that these people buy.

Regardless of the mechanism, it is naive to believe that the Government will recover the amount of dollars they anticipate by enacting this change. People will react and adapt to the changes in a way that reduces the overall take of the government.

I don’t disagree that in the long run the removal of this subsidy would make the economy more efficient, it’s just that the reaosn for doing so (to generate more revenue for the Government) may not come to pass.[/quote]

No disagreement. It will affect the lifestyles of people in that income bracket. Phased in over a 10 year period, they’ll learn to live with it. I think the net effect on housing values will be slight. We’ll see larger downpayments. More shorter loans. People in that income bracket should be able to pay off a loan much faster than 30 years.

And I think you may have misunderstood something I said, maybe I didn’t explain it well enough. This would be a good revenue-neutral tax change. Rates could be lowered to account for the elimination of the deduction. (As opposed to phasing out the deduction only for higher income taxpayers, which would be a revenue increase.)

[SK in CV]

[quote=FormerSanDiegan]

The interest deduction on a 800K loan is something like 48K per year (at 6%). For someone making 250K per year, that amounts to a deduciton worth somewhere in the neighborhood of 19K.

I personally believe that 19K per year increase in costs is relevant to people who make ~ 250-300K. This will reduce the amount households in the 200-400K income can afford to pay for housing and thus will significantly impact the price of housing in the categories that these people buy.

Regardless of the mechanism, it is naive to believe that the Government will recover the amount of dollars they anticipate by enacting this change. People will react and adapt to the changes in a way that reduces the overall take of the government.

I don’t disagree that in the long run the removal of this subsidy would make the economy more efficient, it’s just that the reaosn for doing so (to generate more revenue for the Government) may not come to pass.[/quote]

No disagreement. It will affect the lifestyles of people in that income bracket. Phased in over a 10 year period, they’ll learn to live with it. I think the net effect on housing values will be slight. We’ll see larger downpayments. More shorter loans. People in that income bracket should be able to pay off a loan much faster than 30 years.

And I think you may have misunderstood something I said, maybe I didn’t explain it well enough. This would be a good revenue-neutral tax change. Rates could be lowered to account for the elimination of the deduction. (As opposed to phasing out the deduction only for higher income taxpayers, which would be a revenue increase.)

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