Elimination of Mortgage Deduction

[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 If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.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.

[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.

The presumption by some folks in government, as well as on main street, is that everyone’s entire income belongs to the government initially and anything they give you back (e.g. by reducing taxes) is a ‘gift’ that is costing them money.

I for one would probably sell my house and rent if they remove the mortgage deduction. Owning a home is expensive; maintenance costs are very high. If I lose the write off on that $28k I’m spending every year on mortgage interest that makes maintenance that much more cumbersome.

Screw it…no mortgage I don’t need to earn as much money so I can afford to take a much lower paying job….which of course means that it will probably be a wash WRT total tax they extract from me. Seems that they never consider this angle.

[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.

The presumption by some folks in government, as well as on main street, is that everyone’s entire income belongs to the government initially and anything they give you back (e.g. by reducing taxes) is a ‘gift’ that is costing them money.

I for one would probably sell my house and rent if they remove the mortgage deduction. Owning a home is expensive; maintenance costs are very high. If I lose the write off on that $28k I’m spending every year on mortgage interest that makes maintenance that much more cumbersome.

Screw it…no mortgage I don’t need to earn as much money so I can afford to take a much lower paying job….which of course means that it will probably be a wash WRT total tax they extract from me. Seems that they never consider this angle.

[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.

The presumption by some folks in government, as well as on main street, is that everyone’s entire income belongs to the government initially and anything they give you back (e.g. by reducing taxes) is a ‘gift’ that is costing them money.

I for one would probably sell my house and rent if they remove the mortgage deduction. Owning a home is expensive; maintenance costs are very high. If I lose the write off on that $28k I’m spending every year on mortgage interest that makes maintenance that much more cumbersome.

Screw it…no mortgage I don’t need to earn as much money so I can afford to take a much lower paying job….which of course means that it will probably be a wash WRT total tax they extract from me. Seems that they never consider this angle.

[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.

The presumption by some folks in government, as well as on main street, is that everyone’s entire income belongs to the government initially and anything they give you back (e.g. by reducing taxes) is a ‘gift’ that is costing them money.

I for one would probably sell my house and rent if they remove the mortgage deduction. Owning a home is expensive; maintenance costs are very high. If I lose the write off on that $28k I’m spending every year on mortgage interest that makes maintenance that much more cumbersome.

Screw it…no mortgage I don’t need to earn as much money so I can afford to take a much lower paying job….which of course means that it will probably be a wash WRT total tax they extract from me. Seems that they never consider this angle.

[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.

The presumption by some folks in government, as well as on main street, is that everyone’s entire income belongs to the government initially and anything they give you back (e.g. by reducing taxes) is a ‘gift’ that is costing them money.

I for one would probably sell my house and rent if they remove the mortgage deduction. Owning a home is expensive; maintenance costs are very high. If I lose the write off on that $28k I’m spending every year on mortgage interest that makes maintenance that much more cumbersome.

Screw it…no mortgage I don’t need to earn as much money so I can afford to take a much lower paying job….which of course means that it will probably be a wash WRT total tax they extract from me. Seems that they never consider this angle.

[scaredyclassic]

you’renot really losing a 28,000 writeoff, you’re losing 28,000 minus the standard deduction i think 11,000 that you would other wise get. So we’re really only talking about a 17,000 deduction, or maybe $6,000 a year cash. Is that much money really what makes you an owner v. a renter? I guess it’a about equal to preperty taxes and insurance, maybe a bit less. i don’t know. maybe you would say screw it for 6,000. I would. But a lot of people probably wouldn’t. i just cannot udnerstand how intelligent people still think there is a tax advantage to owning a home. the mortgage deduction seems to perfectly conform to the amount of the proeprty taxes and insurance i’d have to pay, thereby negating any actual savings. It’s all a treading water game.

[scaredyclassic]

you’renot really losing a 28,000 writeoff, you’re losing 28,000 minus the standard deduction i think 11,000 that you would other wise get. So we’re really only talking about a 17,000 deduction, or maybe $6,000 a year cash. Is that much money really what makes you an owner v. a renter? I guess it’a about equal to preperty taxes and insurance, maybe a bit less. i don’t know. maybe you would say screw it for 6,000. I would. But a lot of people probably wouldn’t. i just cannot udnerstand how intelligent people still think there is a tax advantage to owning a home. the mortgage deduction seems to perfectly conform to the amount of the proeprty taxes and insurance i’d have to pay, thereby negating any actual savings. It’s all a treading water game.

[scaredyclassic]

you’renot really losing a 28,000 writeoff, you’re losing 28,000 minus the standard deduction i think 11,000 that you would other wise get. So we’re really only talking about a 17,000 deduction, or maybe $6,000 a year cash. Is that much money really what makes you an owner v. a renter? I guess it’a about equal to preperty taxes and insurance, maybe a bit less. i don’t know. maybe you would say screw it for 6,000. I would. But a lot of people probably wouldn’t. i just cannot udnerstand how intelligent people still think there is a tax advantage to owning a home. the mortgage deduction seems to perfectly conform to the amount of the proeprty taxes and insurance i’d have to pay, thereby negating any actual savings. It’s all a treading water game.

[scaredyclassic]

you’renot really losing a 28,000 writeoff, you’re losing 28,000 minus the standard deduction i think 11,000 that you would other wise get. So we’re really only talking about a 17,000 deduction, or maybe $6,000 a year cash. Is that much money really what makes you an owner v. a renter? I guess it’a about equal to preperty taxes and insurance, maybe a bit less. i don’t know. maybe you would say screw it for 6,000. I would. But a lot of people probably wouldn’t. i just cannot udnerstand how intelligent people still think there is a tax advantage to owning a home. the mortgage deduction seems to perfectly conform to the amount of the proeprty taxes and insurance i’d have to pay, thereby negating any actual savings. It’s all a treading water game.

[scaredyclassic]

you’renot really losing a 28,000 writeoff, you’re losing 28,000 minus the standard deduction i think 11,000 that you would other wise get. So we’re really only talking about a 17,000 deduction, or maybe $6,000 a year cash. Is that much money really what makes you an owner v. a renter? I guess it’a about equal to preperty taxes and insurance, maybe a bit less. i don’t know. maybe you would say screw it for 6,000. I would. But a lot of people probably wouldn’t. i just cannot udnerstand how intelligent people still think there is a tax advantage to owning a home. the mortgage deduction seems to perfectly conform to the amount of the proeprty taxes and insurance i’d have to pay, thereby negating any actual savings. It’s all a treading water game.

[Coronita]

[quote=walterwhite]you’renot really losing a 28,000 writeoff, you’re losing 28,000 minus the standard deduction i think 11,000 that you would other wise get. So we’re really only talking about a 17,000 deduction, or maybe $6,000 a year cash. Is that much money really what makes you an owner v. a renter? I guess it’a about equal to preperty taxes and insurance, maybe a bit less. i don’t know. maybe you would say screw it for 6,000. I would. But a lot of people probably wouldn’t. i just cannot udnerstand how intelligent people still think there is a tax advantage to owning a home. the mortgage deduction seems to perfectly conform to the amount of the proeprty taxes and insurance i’d have to pay, thereby negating any actual savings. It’s all a treading water game.[/quote]

It depends. walter. I mentioned this on another thread, and while it probably doesn’t make sense to in this environment, we had some relatives that in the early 80ies that instead of contribution to a 401k, ATM’ed the hell out of their primary home home and bought a bunch of rental property that cash flowed or broke even.

Their rationale was 401k was just deferring the tax treatment (which they predicted for them would end up being taxed considerably more than during their retirement versus during their working years)…So instead of contributing to a 401k, they heavily refinanced after refinanced their primary home to buy more and more income producing rentals. And post retirement, what they ended up doing was switching each property from one rental back to primary residence, and cashing in on the $500k free cap gains, over the course of 6 years so far. Comparing this to some of their peers who did the traditional 401k/savings route…Those people on are not being forced to take mandatory distributions and on top of that are now going to pay penalties for having to over-withdraw…. I don’t think the issue here is leveraging/atming the hell out of your home. The issue that most americans have is what they do with the cash. They don’t reinvest it but instead blow it on bling and/or overspeculate. But back to your original question. I think from a tax perspective, they enjoyed their mortgage deduction quite well, and on top of that got a free pass on the cap gains…

[Coronita]

[quote=walterwhite]you’renot really losing a 28,000 writeoff, you’re losing 28,000 minus the standard deduction i think 11,000 that you would other wise get. So we’re really only talking about a 17,000 deduction, or maybe $6,000 a year cash. Is that much money really what makes you an owner v. a renter? I guess it’a about equal to preperty taxes and insurance, maybe a bit less. i don’t know. maybe you would say screw it for 6,000. I would. But a lot of people probably wouldn’t. i just cannot udnerstand how intelligent people still think there is a tax advantage to owning a home. the mortgage deduction seems to perfectly conform to the amount of the proeprty taxes and insurance i’d have to pay, thereby negating any actual savings. It’s all a treading water game.[/quote]

It depends. walter. I mentioned this on another thread, and while it probably doesn’t make sense to in this environment, we had some relatives that in the early 80ies that instead of contribution to a 401k, ATM’ed the hell out of their primary home home and bought a bunch of rental property that cash flowed or broke even.

Their rationale was 401k was just deferring the tax treatment (which they predicted for them would end up being taxed considerably more than during their retirement versus during their working years)…So instead of contributing to a 401k, they heavily refinanced after refinanced their primary home to buy more and more income producing rentals. And post retirement, what they ended up doing was switching each property from one rental back to primary residence, and cashing in on the $500k free cap gains, over the course of 6 years so far. Comparing this to some of their peers who did the traditional 401k/savings route…Those people on are not being forced to take mandatory distributions and on top of that are now going to pay penalties for having to over-withdraw…. I don’t think the issue here is leveraging/atming the hell out of your home. The issue that most americans have is what they do with the cash. They don’t reinvest it but instead blow it on bling and/or overspeculate. But back to your original question. I think from a tax perspective, they enjoyed their mortgage deduction quite well, and on top of that got a free pass on the cap gains…

[Coronita]

[quote=walterwhite]you’renot really losing a 28,000 writeoff, you’re losing 28,000 minus the standard deduction i think 11,000 that you would other wise get. So we’re really only talking about a 17,000 deduction, or maybe $6,000 a year cash. Is that much money really what makes you an owner v. a renter? I guess it’a about equal to preperty taxes and insurance, maybe a bit less. i don’t know. maybe you would say screw it for 6,000. I would. But a lot of people probably wouldn’t. i just cannot udnerstand how intelligent people still think there is a tax advantage to owning a home. the mortgage deduction seems to perfectly conform to the amount of the proeprty taxes and insurance i’d have to pay, thereby negating any actual savings. It’s all a treading water game.[/quote]

It depends. walter. I mentioned this on another thread, and while it probably doesn’t make sense to in this environment, we had some relatives that in the early 80ies that instead of contribution to a 401k, ATM’ed the hell out of their primary home home and bought a bunch of rental property that cash flowed or broke even.

Their rationale was 401k was just deferring the tax treatment (which they predicted for them would end up being taxed considerably more than during their retirement versus during their working years)…So instead of contributing to a 401k, they heavily refinanced after refinanced their primary home to buy more and more income producing rentals. And post retirement, what they ended up doing was switching each property from one rental back to primary residence, and cashing in on the $500k free cap gains, over the course of 6 years so far. Comparing this to some of their peers who did the traditional 401k/savings route…Those people on are not being forced to take mandatory distributions and on top of that are now going to pay penalties for having to over-withdraw…. I don’t think the issue here is leveraging/atming the hell out of your home. The issue that most americans have is what they do with the cash. They don’t reinvest it but instead blow it on bling and/or overspeculate. But back to your original question. I think from a tax perspective, they enjoyed their mortgage deduction quite well, and on top of that got a free pass on the cap gains…

[Coronita]

[quote=walterwhite]you’renot really losing a 28,000 writeoff, you’re losing 28,000 minus the standard deduction i think 11,000 that you would other wise get. So we’re really only talking about a 17,000 deduction, or maybe $6,000 a year cash. Is that much money really what makes you an owner v. a renter? I guess it’a about equal to preperty taxes and insurance, maybe a bit less. i don’t know. maybe you would say screw it for 6,000. I would. But a lot of people probably wouldn’t. i just cannot udnerstand how intelligent people still think there is a tax advantage to owning a home. the mortgage deduction seems to perfectly conform to the amount of the proeprty taxes and insurance i’d have to pay, thereby negating any actual savings. It’s all a treading water game.[/quote]

It depends. walter. I mentioned this on another thread, and while it probably doesn’t make sense to in this environment, we had some relatives that in the early 80ies that instead of contribution to a 401k, ATM’ed the hell out of their primary home home and bought a bunch of rental property that cash flowed or broke even.

Their rationale was 401k was just deferring the tax treatment (which they predicted for them would end up being taxed considerably more than during their retirement versus during their working years)…So instead of contributing to a 401k, they heavily refinanced after refinanced their primary home to buy more and more income producing rentals. And post retirement, what they ended up doing was switching each property from one rental back to primary residence, and cashing in on the $500k free cap gains, over the course of 6 years so far. Comparing this to some of their peers who did the traditional 401k/savings route…Those people on are not being forced to take mandatory distributions and on top of that are now going to pay penalties for having to over-withdraw…. I don’t think the issue here is leveraging/atming the hell out of your home. The issue that most americans have is what they do with the cash. They don’t reinvest it but instead blow it on bling and/or overspeculate. But back to your original question. I think from a tax perspective, they enjoyed their mortgage deduction quite well, and on top of that got a free pass on the cap gains…

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