Elimination of Mortgage Deduction

[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…

[PatentGuy]

Walterwhite,

I don’t know Meadandale’s personal tax situation, but most folks who itemize deductions would have more than their home mortgage interest to deduct – they would also typically have property taxes and state income taxes, plus some charitable deductions, which may be considerable if they are dutiful Mormons or the like (10% tithe?)

People who are old enough to have been paying taxes since early 1980s may recall that the Reagan tax changes eliminated deductions for “personal loan interest” (i.e., credit cards, student loans). I believe they phased them out over 5 years or something like that.

Clinton substantially fanged the mortgage interest deduction for the “wealthy” with his “phase out” of itemized deductions (3% of the amount over $250K AGI – something like that – up to 80% total). That schedule will be back starting January 1. It is a killer for the “rich” (defined by the class warriors based on earned income, which is taxed, not on accumulated wealth, which is not taxed) who live in high tax state like California, since you also lose much of your state income tax deduction. GWB rates still have the phase out, but is much less drastic – I believe 1% instead of 3%.

So, the mortgage interest deduction is already phased out down to 20% for the “rich.”

[PatentGuy]

Walterwhite,

I don’t know Meadandale’s personal tax situation, but most folks who itemize deductions would have more than their home mortgage interest to deduct – they would also typically have property taxes and state income taxes, plus some charitable deductions, which may be considerable if they are dutiful Mormons or the like (10% tithe?)

People who are old enough to have been paying taxes since early 1980s may recall that the Reagan tax changes eliminated deductions for “personal loan interest” (i.e., credit cards, student loans). I believe they phased them out over 5 years or something like that.

Clinton substantially fanged the mortgage interest deduction for the “wealthy” with his “phase out” of itemized deductions (3% of the amount over $250K AGI – something like that – up to 80% total). That schedule will be back starting January 1. It is a killer for the “rich” (defined by the class warriors based on earned income, which is taxed, not on accumulated wealth, which is not taxed) who live in high tax state like California, since you also lose much of your state income tax deduction. GWB rates still have the phase out, but is much less drastic – I believe 1% instead of 3%.

So, the mortgage interest deduction is already phased out down to 20% for the “rich.”

[PatentGuy]

Walterwhite,

I don’t know Meadandale’s personal tax situation, but most folks who itemize deductions would have more than their home mortgage interest to deduct – they would also typically have property taxes and state income taxes, plus some charitable deductions, which may be considerable if they are dutiful Mormons or the like (10% tithe?)

People who are old enough to have been paying taxes since early 1980s may recall that the Reagan tax changes eliminated deductions for “personal loan interest” (i.e., credit cards, student loans). I believe they phased them out over 5 years or something like that.

Clinton substantially fanged the mortgage interest deduction for the “wealthy” with his “phase out” of itemized deductions (3% of the amount over $250K AGI – something like that – up to 80% total). That schedule will be back starting January 1. It is a killer for the “rich” (defined by the class warriors based on earned income, which is taxed, not on accumulated wealth, which is not taxed) who live in high tax state like California, since you also lose much of your state income tax deduction. GWB rates still have the phase out, but is much less drastic – I believe 1% instead of 3%.

So, the mortgage interest deduction is already phased out down to 20% for the “rich.”

[PatentGuy]

Walterwhite,

I don’t know Meadandale’s personal tax situation, but most folks who itemize deductions would have more than their home mortgage interest to deduct – they would also typically have property taxes and state income taxes, plus some charitable deductions, which may be considerable if they are dutiful Mormons or the like (10% tithe?)

People who are old enough to have been paying taxes since early 1980s may recall that the Reagan tax changes eliminated deductions for “personal loan interest” (i.e., credit cards, student loans). I believe they phased them out over 5 years or something like that.

Clinton substantially fanged the mortgage interest deduction for the “wealthy” with his “phase out” of itemized deductions (3% of the amount over $250K AGI – something like that – up to 80% total). That schedule will be back starting January 1. It is a killer for the “rich” (defined by the class warriors based on earned income, which is taxed, not on accumulated wealth, which is not taxed) who live in high tax state like California, since you also lose much of your state income tax deduction. GWB rates still have the phase out, but is much less drastic – I believe 1% instead of 3%.

So, the mortgage interest deduction is already phased out down to 20% for the “rich.”

[PatentGuy]

Walterwhite,

I don’t know Meadandale’s personal tax situation, but most folks who itemize deductions would have more than their home mortgage interest to deduct – they would also typically have property taxes and state income taxes, plus some charitable deductions, which may be considerable if they are dutiful Mormons or the like (10% tithe?)

People who are old enough to have been paying taxes since early 1980s may recall that the Reagan tax changes eliminated deductions for “personal loan interest” (i.e., credit cards, student loans). I believe they phased them out over 5 years or something like that.

Clinton substantially fanged the mortgage interest deduction for the “wealthy” with his “phase out” of itemized deductions (3% of the amount over $250K AGI – something like that – up to 80% total). That schedule will be back starting January 1. It is a killer for the “rich” (defined by the class warriors based on earned income, which is taxed, not on accumulated wealth, which is not taxed) who live in high tax state like California, since you also lose much of your state income tax deduction. GWB rates still have the phase out, but is much less drastic – I believe 1% instead of 3%.

So, the mortgage interest deduction is already phased out down to 20% for the “rich.”

[Coronita]

[quote=PatentGuy]Walterwhite,

I don’t know Meadandale’s personal tax situation, but most folks who itemize deductions would have more than their home mortgage interest to deduct – they would also typically have property taxes and state income taxes, plus some charitable deductions, which may be considerable if they are dutiful Mormons or the like (10% tithe?)

People who are old enough to have been paying taxes since early 1980s may recall that the Reagan tax changes eliminated deductions for “personal loan interest” (i.e., credit cards, student loans). I believe they phased them out over 5 years or something like that.

Clinton substantially fanged the mortgage interest deduction for the “wealthy” with his “phase out” of itemized deductions (3% of the amount over $250K AGI – something like that – up to 80% total). That schedule will be back starting January 1. It is a killer for the “rich” (defined by the class warriors based on earned income, which is taxed, not on accumulated wealth, which is not taxed) who live in high tax state like California, since you also lose much of your state income tax deduction. GWB rates still have the phase out, but is much less drastic – I believe 1% instead of 3%.

So, the mortgage interest deduction is already phased out down to 20% for the “rich.”[/quote]

The bigger problem is that if you buy a home in CA, it will most likely put you into the “i need to pay AMT taxes” category because, under AMT calc rules, taxes paid which would have been itemized (state taxes, property taxes, etc), are not deductions under AMT.

[Coronita]

[quote=PatentGuy]Walterwhite,

I don’t know Meadandale’s personal tax situation, but most folks who itemize deductions would have more than their home mortgage interest to deduct – they would also typically have property taxes and state income taxes, plus some charitable deductions, which may be considerable if they are dutiful Mormons or the like (10% tithe?)

People who are old enough to have been paying taxes since early 1980s may recall that the Reagan tax changes eliminated deductions for “personal loan interest” (i.e., credit cards, student loans). I believe they phased them out over 5 years or something like that.

Clinton substantially fanged the mortgage interest deduction for the “wealthy” with his “phase out” of itemized deductions (3% of the amount over $250K AGI – something like that – up to 80% total). That schedule will be back starting January 1. It is a killer for the “rich” (defined by the class warriors based on earned income, which is taxed, not on accumulated wealth, which is not taxed) who live in high tax state like California, since you also lose much of your state income tax deduction. GWB rates still have the phase out, but is much less drastic – I believe 1% instead of 3%.

So, the mortgage interest deduction is already phased out down to 20% for the “rich.”[/quote]

The bigger problem is that if you buy a home in CA, it will most likely put you into the “i need to pay AMT taxes” category because, under AMT calc rules, taxes paid which would have been itemized (state taxes, property taxes, etc), are not deductions under AMT.

[Coronita]

[quote=PatentGuy]Walterwhite,

I don’t know Meadandale’s personal tax situation, but most folks who itemize deductions would have more than their home mortgage interest to deduct – they would also typically have property taxes and state income taxes, plus some charitable deductions, which may be considerable if they are dutiful Mormons or the like (10% tithe?)

People who are old enough to have been paying taxes since early 1980s may recall that the Reagan tax changes eliminated deductions for “personal loan interest” (i.e., credit cards, student loans). I believe they phased them out over 5 years or something like that.

Clinton substantially fanged the mortgage interest deduction for the “wealthy” with his “phase out” of itemized deductions (3% of the amount over $250K AGI – something like that – up to 80% total). That schedule will be back starting January 1. It is a killer for the “rich” (defined by the class warriors based on earned income, which is taxed, not on accumulated wealth, which is not taxed) who live in high tax state like California, since you also lose much of your state income tax deduction. GWB rates still have the phase out, but is much less drastic – I believe 1% instead of 3%.

So, the mortgage interest deduction is already phased out down to 20% for the “rich.”[/quote]

The bigger problem is that if you buy a home in CA, it will most likely put you into the “i need to pay AMT taxes” category because, under AMT calc rules, taxes paid which would have been itemized (state taxes, property taxes, etc), are not deductions under AMT.

[Coronita]

[quote=PatentGuy]Walterwhite,

I don’t know Meadandale’s personal tax situation, but most folks who itemize deductions would have more than their home mortgage interest to deduct – they would also typically have property taxes and state income taxes, plus some charitable deductions, which may be considerable if they are dutiful Mormons or the like (10% tithe?)

People who are old enough to have been paying taxes since early 1980s may recall that the Reagan tax changes eliminated deductions for “personal loan interest” (i.e., credit cards, student loans). I believe they phased them out over 5 years or something like that.

Clinton substantially fanged the mortgage interest deduction for the “wealthy” with his “phase out” of itemized deductions (3% of the amount over $250K AGI – something like that – up to 80% total). That schedule will be back starting January 1. It is a killer for the “rich” (defined by the class warriors based on earned income, which is taxed, not on accumulated wealth, which is not taxed) who live in high tax state like California, since you also lose much of your state income tax deduction. GWB rates still have the phase out, but is much less drastic – I believe 1% instead of 3%.

So, the mortgage interest deduction is already phased out down to 20% for the “rich.”[/quote]

The bigger problem is that if you buy a home in CA, it will most likely put you into the “i need to pay AMT taxes” category because, under AMT calc rules, taxes paid which would have been itemized (state taxes, property taxes, etc), are not deductions under AMT.

[Coronita]

[quote=PatentGuy]Walterwhite,

I don’t know Meadandale’s personal tax situation, but most folks who itemize deductions would have more than their home mortgage interest to deduct – they would also typically have property taxes and state income taxes, plus some charitable deductions, which may be considerable if they are dutiful Mormons or the like (10% tithe?)

People who are old enough to have been paying taxes since early 1980s may recall that the Reagan tax changes eliminated deductions for “personal loan interest” (i.e., credit cards, student loans). I believe they phased them out over 5 years or something like that.

Clinton substantially fanged the mortgage interest deduction for the “wealthy” with his “phase out” of itemized deductions (3% of the amount over $250K AGI – something like that – up to 80% total). That schedule will be back starting January 1. It is a killer for the “rich” (defined by the class warriors based on earned income, which is taxed, not on accumulated wealth, which is not taxed) who live in high tax state like California, since you also lose much of your state income tax deduction. GWB rates still have the phase out, but is much less drastic – I believe 1% instead of 3%.

So, the mortgage interest deduction is already phased out down to 20% for the “rich.”[/quote]

The bigger problem is that if you buy a home in CA, it will most likely put you into the “i need to pay AMT taxes” category because, under AMT calc rules, taxes paid which would have been itemized (state taxes, property taxes, etc), are not deductions under AMT.

[PatentGuy]

By the way, the concept of using a corporation to buy a home in order to fully deduct the mortgage interest sounds too easy to be true.

So, the corporation buys/owns the home, pays for any mortgage, maintenance, taxes, insurance, maybe utilities, whatever can be deducted as business expense, such as depreciation. The underlying person(s) (shareholders) rent from the corporation at fair market rent. If the rent is less than the toal exepnses, you have a tax deduction that can be passed through to the shareholders (if you make more than $150K, has to be carried over, but can be washed-out when you sell).

Am I missing something?

I suppose one drawback is that a corporation cannot take advantage of the $500K tax-free gain (another cause of the housing bubble), should real estate ever go up again in the future. But, any gain would be taxed at long term cap gain rates, and any loss could be deducted at full income tax rate.

[PatentGuy]

By the way, the concept of using a corporation to buy a home in order to fully deduct the mortgage interest sounds too easy to be true.

So, the corporation buys/owns the home, pays for any mortgage, maintenance, taxes, insurance, maybe utilities, whatever can be deducted as business expense, such as depreciation. The underlying person(s) (shareholders) rent from the corporation at fair market rent. If the rent is less than the toal exepnses, you have a tax deduction that can be passed through to the shareholders (if you make more than $150K, has to be carried over, but can be washed-out when you sell).

Am I missing something?

I suppose one drawback is that a corporation cannot take advantage of the $500K tax-free gain (another cause of the housing bubble), should real estate ever go up again in the future. But, any gain would be taxed at long term cap gain rates, and any loss could be deducted at full income tax rate.

[PatentGuy]

By the way, the concept of using a corporation to buy a home in order to fully deduct the mortgage interest sounds too easy to be true.

So, the corporation buys/owns the home, pays for any mortgage, maintenance, taxes, insurance, maybe utilities, whatever can be deducted as business expense, such as depreciation. The underlying person(s) (shareholders) rent from the corporation at fair market rent. If the rent is less than the toal exepnses, you have a tax deduction that can be passed through to the shareholders (if you make more than $150K, has to be carried over, but can be washed-out when you sell).

Am I missing something?

I suppose one drawback is that a corporation cannot take advantage of the $500K tax-free gain (another cause of the housing bubble), should real estate ever go up again in the future. But, any gain would be taxed at long term cap gain rates, and any loss could be deducted at full income tax rate.

[PatentGuy]

By the way, the concept of using a corporation to buy a home in order to fully deduct the mortgage interest sounds too easy to be true.

So, the corporation buys/owns the home, pays for any mortgage, maintenance, taxes, insurance, maybe utilities, whatever can be deducted as business expense, such as depreciation. The underlying person(s) (shareholders) rent from the corporation at fair market rent. If the rent is less than the toal exepnses, you have a tax deduction that can be passed through to the shareholders (if you make more than $150K, has to be carried over, but can be washed-out when you sell).

Am I missing something?

I suppose one drawback is that a corporation cannot take advantage of the $500K tax-free gain (another cause of the housing bubble), should real estate ever go up again in the future. But, any gain would be taxed at long term cap gain rates, and any loss could be deducted at full income tax rate.

[Author]

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