Elimination of Mortgage Deduction

[joec]

Just read this article over weekend. You see this topic come up every 5 years or so, but I doubt it would ever pass and if it did, the only change I’d think they implement is lowering the amount from the 1.1 mil to something less (maybe based on state so in CA, probably 697 something or other)…

What I’ve always thought was annoying is that for income properties, you could always deduct all your expenses so if they made this across the board cut completely, you’d see all the home owners become renters and just maintain their deduction by turning their current home into a rental (assuming it could cash flow of course)…

They would then also start deducting all those HOA fees as well take 26.5 depreciation as well as all maintenance costs. The home mortgage and property tax is a pretty big deduction for more middle class folks so I wouldn’t be surprised if one change leads to a whole bunch of strategies around it…

[ucodegen]

A long time ago, I was against the home mortgage interest deduction.. that is until I heard how some people were using corporations to get around it.

What the mortgage interest deduction does, is harmonizes (makes consistent) the types of deductions that corporations can use, the types of deductions the wealthy were able to use because corps could and the wealthy had good attorneys, vs what the rest of the not so wealthy population.

I would suspect what may happen is the IRS start looking at what a HELOC is used for, and whether the tax deduction on the interest is really ‘legal’ or justified. If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.

Another item the IRS might consider, is looking at what money is used for when there is a cash-out refi, or a second added to the mortgage.

A lot of the abuses that occurred leading up to the bubble implosion were aided by the equity withdraw interest payments being tax-deductible even though the money was not used to improve the property.

[quote joec]What I’ve always thought was annoying is that for income properties, you could always deduct all your expenses so if they made this across the board cut completely, you’d see all the home owners become renters and … I wouldn’t be surprised if one change leads to a whole bunch of strategies around it…[/quote]
BINGO.. though it is not quite as simple. I believe the real method is to create an investment identity and have the property in that identity rent back to you. Run the identity as a NOL until the property is sold. On the investment entities (like investment clubs) tax treatment is passthrough on income and type of income (LTCG, STCG etc)

[ucodegen]

A long time ago, I was against the home mortgage interest deduction.. that is until I heard how some people were using corporations to get around it.

What the mortgage interest deduction does, is harmonizes (makes consistent) the types of deductions that corporations can use, the types of deductions the wealthy were able to use because corps could and the wealthy had good attorneys, vs what the rest of the not so wealthy population.

I would suspect what may happen is the IRS start looking at what a HELOC is used for, and whether the tax deduction on the interest is really ‘legal’ or justified. If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.

Another item the IRS might consider, is looking at what money is used for when there is a cash-out refi, or a second added to the mortgage.

A lot of the abuses that occurred leading up to the bubble implosion were aided by the equity withdraw interest payments being tax-deductible even though the money was not used to improve the property.

[quote joec]What I’ve always thought was annoying is that for income properties, you could always deduct all your expenses so if they made this across the board cut completely, you’d see all the home owners become renters and … I wouldn’t be surprised if one change leads to a whole bunch of strategies around it…[/quote]
BINGO.. though it is not quite as simple. I believe the real method is to create an investment identity and have the property in that identity rent back to you. Run the identity as a NOL until the property is sold. On the investment entities (like investment clubs) tax treatment is passthrough on income and type of income (LTCG, STCG etc)

[ucodegen]

A long time ago, I was against the home mortgage interest deduction.. that is until I heard how some people were using corporations to get around it.

What the mortgage interest deduction does, is harmonizes (makes consistent) the types of deductions that corporations can use, the types of deductions the wealthy were able to use because corps could and the wealthy had good attorneys, vs what the rest of the not so wealthy population.

I would suspect what may happen is the IRS start looking at what a HELOC is used for, and whether the tax deduction on the interest is really ‘legal’ or justified. If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.

Another item the IRS might consider, is looking at what money is used for when there is a cash-out refi, or a second added to the mortgage.

A lot of the abuses that occurred leading up to the bubble implosion were aided by the equity withdraw interest payments being tax-deductible even though the money was not used to improve the property.

[quote joec]What I’ve always thought was annoying is that for income properties, you could always deduct all your expenses so if they made this across the board cut completely, you’d see all the home owners become renters and … I wouldn’t be surprised if one change leads to a whole bunch of strategies around it…[/quote]
BINGO.. though it is not quite as simple. I believe the real method is to create an investment identity and have the property in that identity rent back to you. Run the identity as a NOL until the property is sold. On the investment entities (like investment clubs) tax treatment is passthrough on income and type of income (LTCG, STCG etc)

[ucodegen]

A long time ago, I was against the home mortgage interest deduction.. that is until I heard how some people were using corporations to get around it.

What the mortgage interest deduction does, is harmonizes (makes consistent) the types of deductions that corporations can use, the types of deductions the wealthy were able to use because corps could and the wealthy had good attorneys, vs what the rest of the not so wealthy population.

I would suspect what may happen is the IRS start looking at what a HELOC is used for, and whether the tax deduction on the interest is really ‘legal’ or justified. If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.

Another item the IRS might consider, is looking at what money is used for when there is a cash-out refi, or a second added to the mortgage.

A lot of the abuses that occurred leading up to the bubble implosion were aided by the equity withdraw interest payments being tax-deductible even though the money was not used to improve the property.

[quote joec]What I’ve always thought was annoying is that for income properties, you could always deduct all your expenses so if they made this across the board cut completely, you’d see all the home owners become renters and … I wouldn’t be surprised if one change leads to a whole bunch of strategies around it…[/quote]
BINGO.. though it is not quite as simple. I believe the real method is to create an investment identity and have the property in that identity rent back to you. Run the identity as a NOL until the property is sold. On the investment entities (like investment clubs) tax treatment is passthrough on income and type of income (LTCG, STCG etc)

[ucodegen]

A long time ago, I was against the home mortgage interest deduction.. that is until I heard how some people were using corporations to get around it.

What the mortgage interest deduction does, is harmonizes (makes consistent) the types of deductions that corporations can use, the types of deductions the wealthy were able to use because corps could and the wealthy had good attorneys, vs what the rest of the not so wealthy population.

I would suspect what may happen is the IRS start looking at what a HELOC is used for, and whether the tax deduction on the interest is really ‘legal’ or justified. If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.

Another item the IRS might consider, is looking at what money is used for when there is a cash-out refi, or a second added to the mortgage.

A lot of the abuses that occurred leading up to the bubble implosion were aided by the equity withdraw interest payments being tax-deductible even though the money was not used to improve the property.

[quote joec]What I’ve always thought was annoying is that for income properties, you could always deduct all your expenses so if they made this across the board cut completely, you’d see all the home owners become renters and … I wouldn’t be surprised if one change leads to a whole bunch of strategies around it…[/quote]
BINGO.. though it is not quite as simple. I believe the real method is to create an investment identity and have the property in that identity rent back to you. Run the identity as a NOL until the property is sold. On the investment entities (like investment clubs) tax treatment is passthrough on income and type of income (LTCG, STCG etc)

[Coronita]

[quote=ucodegen]

I would suspect what may happen is the IRS start looking at what a HELOC is used for, and whether the tax deduction on the interest is really ‘legal’ or justified. If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.
[/quote]

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.

[Coronita]

[quote=ucodegen]

I would suspect what may happen is the IRS start looking at what a HELOC is used for, and whether the tax deduction on the interest is really ‘legal’ or justified. If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.
[/quote]

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.

[Coronita]

[quote=ucodegen]

I would suspect what may happen is the IRS start looking at what a HELOC is used for, and whether the tax deduction on the interest is really ‘legal’ or justified. If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.
[/quote]

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.

[Coronita]

[quote=ucodegen]

I would suspect what may happen is the IRS start looking at what a HELOC is used for, and whether the tax deduction on the interest is really ‘legal’ or justified. If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.
[/quote]

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.

[Coronita]

[quote=ucodegen]

I would suspect what may happen is the IRS start looking at what a HELOC is used for, and whether the tax deduction on the interest is really ‘legal’ or justified. If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.
[/quote]

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.

[joec]

[quote=ucodegen]A long time ago, I was against the home mortgage interest deduction.. that is until I heard how some people were using corporations to get around it.

What the mortgage interest deduction does, is harmonizes (makes consistent) the types of deductions that corporations can use, the types of deductions the wealthy were able to use because corps could and the wealthy had good attorneys, vs what the rest of the not so wealthy population.

I would suspect what may happen is the IRS start looking at what a HELOC is used for, and whether the tax deduction on the interest is really ‘legal’ or justified. If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.

Another item the IRS might consider, is looking at what money is used for when there is a cash-out refi, or a second added to the mortgage.

A lot of the abuses that occurred leading up to the bubble implosion were aided by the equity withdraw interest payments being tax-deductible even though the money was not used to improve the property.

[quote joec]What I’ve always thought was annoying is that for income properties, you could always deduct all your expenses so if they made this across the board cut completely, you’d see all the home owners become renters and … I wouldn’t be surprised if one change leads to a whole bunch of strategies around it…[/quote]
BINGO.. though it is not quite as simple. I believe the real method is to create an investment identity and have the property in that identity rent back to you. Run the identity as a NOL until the property is sold. On the investment entities (like investment clubs) tax treatment is passthrough on income and type of income (LTCG, STCG etc)[/quote]

Yeah, your idea sounds much better than renting someone else’s house. 🙂

I just think fighting this uphill road of mortgage interest deduction is a waste of time. They will probably have an easier time just letting the Bush cuts expire or simply raise rates across the board or have no cap on Social Security taxes, etc…

Especially as was noted above, over 50% of the population are home owners and most of those folks vote. If they pass anything, the people will probably kick that person out and elect someone new to simply repeal the tax law.

[joec]

[quote=ucodegen]A long time ago, I was against the home mortgage interest deduction.. that is until I heard how some people were using corporations to get around it.

What the mortgage interest deduction does, is harmonizes (makes consistent) the types of deductions that corporations can use, the types of deductions the wealthy were able to use because corps could and the wealthy had good attorneys, vs what the rest of the not so wealthy population.

I would suspect what may happen is the IRS start looking at what a HELOC is used for, and whether the tax deduction on the interest is really ‘legal’ or justified. If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.

Another item the IRS might consider, is looking at what money is used for when there is a cash-out refi, or a second added to the mortgage.

A lot of the abuses that occurred leading up to the bubble implosion were aided by the equity withdraw interest payments being tax-deductible even though the money was not used to improve the property.

[quote joec]What I’ve always thought was annoying is that for income properties, you could always deduct all your expenses so if they made this across the board cut completely, you’d see all the home owners become renters and … I wouldn’t be surprised if one change leads to a whole bunch of strategies around it…[/quote]
BINGO.. though it is not quite as simple. I believe the real method is to create an investment identity and have the property in that identity rent back to you. Run the identity as a NOL until the property is sold. On the investment entities (like investment clubs) tax treatment is passthrough on income and type of income (LTCG, STCG etc)[/quote]

Yeah, your idea sounds much better than renting someone else’s house. 🙂

I just think fighting this uphill road of mortgage interest deduction is a waste of time. They will probably have an easier time just letting the Bush cuts expire or simply raise rates across the board or have no cap on Social Security taxes, etc…

Especially as was noted above, over 50% of the population are home owners and most of those folks vote. If they pass anything, the people will probably kick that person out and elect someone new to simply repeal the tax law.

[joec]

[quote=ucodegen]A long time ago, I was against the home mortgage interest deduction.. that is until I heard how some people were using corporations to get around it.

What the mortgage interest deduction does, is harmonizes (makes consistent) the types of deductions that corporations can use, the types of deductions the wealthy were able to use because corps could and the wealthy had good attorneys, vs what the rest of the not so wealthy population.

I would suspect what may happen is the IRS start looking at what a HELOC is used for, and whether the tax deduction on the interest is really ‘legal’ or justified. If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.

Another item the IRS might consider, is looking at what money is used for when there is a cash-out refi, or a second added to the mortgage.

A lot of the abuses that occurred leading up to the bubble implosion were aided by the equity withdraw interest payments being tax-deductible even though the money was not used to improve the property.

[quote joec]What I’ve always thought was annoying is that for income properties, you could always deduct all your expenses so if they made this across the board cut completely, you’d see all the home owners become renters and … I wouldn’t be surprised if one change leads to a whole bunch of strategies around it…[/quote]
BINGO.. though it is not quite as simple. I believe the real method is to create an investment identity and have the property in that identity rent back to you. Run the identity as a NOL until the property is sold. On the investment entities (like investment clubs) tax treatment is passthrough on income and type of income (LTCG, STCG etc)[/quote]

Yeah, your idea sounds much better than renting someone else’s house. 🙂

I just think fighting this uphill road of mortgage interest deduction is a waste of time. They will probably have an easier time just letting the Bush cuts expire or simply raise rates across the board or have no cap on Social Security taxes, etc…

Especially as was noted above, over 50% of the population are home owners and most of those folks vote. If they pass anything, the people will probably kick that person out and elect someone new to simply repeal the tax law.

[joec]

[quote=ucodegen]A long time ago, I was against the home mortgage interest deduction.. that is until I heard how some people were using corporations to get around it.

What the mortgage interest deduction does, is harmonizes (makes consistent) the types of deductions that corporations can use, the types of deductions the wealthy were able to use because corps could and the wealthy had good attorneys, vs what the rest of the not so wealthy population.

I would suspect what may happen is the IRS start looking at what a HELOC is used for, and whether the tax deduction on the interest is really ‘legal’ or justified. If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.

Another item the IRS might consider, is looking at what money is used for when there is a cash-out refi, or a second added to the mortgage.

A lot of the abuses that occurred leading up to the bubble implosion were aided by the equity withdraw interest payments being tax-deductible even though the money was not used to improve the property.

[quote joec]What I’ve always thought was annoying is that for income properties, you could always deduct all your expenses so if they made this across the board cut completely, you’d see all the home owners become renters and … I wouldn’t be surprised if one change leads to a whole bunch of strategies around it…[/quote]
BINGO.. though it is not quite as simple. I believe the real method is to create an investment identity and have the property in that identity rent back to you. Run the identity as a NOL until the property is sold. On the investment entities (like investment clubs) tax treatment is passthrough on income and type of income (LTCG, STCG etc)[/quote]

Yeah, your idea sounds much better than renting someone else’s house. 🙂

I just think fighting this uphill road of mortgage interest deduction is a waste of time. They will probably have an easier time just letting the Bush cuts expire or simply raise rates across the board or have no cap on Social Security taxes, etc…

Especially as was noted above, over 50% of the population are home owners and most of those folks vote. If they pass anything, the people will probably kick that person out and elect someone new to simply repeal the tax law.

[Author]

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