Elimination of Mortgage Deduction

[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]

True, Flu, but the AMT rate is 28%, whereas the top marginal rate is 35%, going up to 39.5%, so you still pay more than the AMT rate if you are “rich”, even with the lost deductions. This will be especially true starting in 2011, when the itemized deduction phase-out is back in full force, since AMT income will be much closer to regular income.

Be thankful you don’t have New Jersey style property taxes (yet) in CA. AMT must crush the $250K earners in New Jersey who are paying $25K and up in property taxes in addition to state income taxes, plus mortgage interest.

[PatentGuy]

True, Flu, but the AMT rate is 28%, whereas the top marginal rate is 35%, going up to 39.5%, so you still pay more than the AMT rate if you are “rich”, even with the lost deductions. This will be especially true starting in 2011, when the itemized deduction phase-out is back in full force, since AMT income will be much closer to regular income.

Be thankful you don’t have New Jersey style property taxes (yet) in CA. AMT must crush the $250K earners in New Jersey who are paying $25K and up in property taxes in addition to state income taxes, plus mortgage interest.

[PatentGuy]

True, Flu, but the AMT rate is 28%, whereas the top marginal rate is 35%, going up to 39.5%, so you still pay more than the AMT rate if you are “rich”, even with the lost deductions. This will be especially true starting in 2011, when the itemized deduction phase-out is back in full force, since AMT income will be much closer to regular income.

Be thankful you don’t have New Jersey style property taxes (yet) in CA. AMT must crush the $250K earners in New Jersey who are paying $25K and up in property taxes in addition to state income taxes, plus mortgage interest.

[PatentGuy]

True, Flu, but the AMT rate is 28%, whereas the top marginal rate is 35%, going up to 39.5%, so you still pay more than the AMT rate if you are “rich”, even with the lost deductions. This will be especially true starting in 2011, when the itemized deduction phase-out is back in full force, since AMT income will be much closer to regular income.

Be thankful you don’t have New Jersey style property taxes (yet) in CA. AMT must crush the $250K earners in New Jersey who are paying $25K and up in property taxes in addition to state income taxes, plus mortgage interest.

[PatentGuy]

True, Flu, but the AMT rate is 28%, whereas the top marginal rate is 35%, going up to 39.5%, so you still pay more than the AMT rate if you are “rich”, even with the lost deductions. This will be especially true starting in 2011, when the itemized deduction phase-out is back in full force, since AMT income will be much closer to regular income.

Be thankful you don’t have New Jersey style property taxes (yet) in CA. AMT must crush the $250K earners in New Jersey who are paying $25K and up in property taxes in addition to state income taxes, plus mortgage interest.

[enron_by_the_sea]

[quote=flu]
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.[/quote]

Exactly. Folks who get repeatedly hit with AMT realize that big fat mortgage is sweet. They practically do not allow any other deduction under AMT

[enron_by_the_sea]

[quote=flu]
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.[/quote]

Exactly. Folks who get repeatedly hit with AMT realize that big fat mortgage is sweet. They practically do not allow any other deduction under AMT

[enron_by_the_sea]

[quote=flu]
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.[/quote]

Exactly. Folks who get repeatedly hit with AMT realize that big fat mortgage is sweet. They practically do not allow any other deduction under AMT

[enron_by_the_sea]

[quote=flu]
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.[/quote]

Exactly. Folks who get repeatedly hit with AMT realize that big fat mortgage is sweet. They practically do not allow any other deduction under AMT

[enron_by_the_sea]

[quote=flu]
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.[/quote]

Exactly. Folks who get repeatedly hit with AMT realize that big fat mortgage is sweet. They practically do not allow any other deduction under AMT

[ocrenter]

[quote=flu]

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.[/quote]

This is where small business owners really have a step up above all of us. The amount of write off that they can put in as “business expense” is huge.

quite frankly they get so much write off that at the end, they end up below the AMT radar.

AMT is really just a way to bring the upper middle professional class down in line with the middle class. The real rich doesn’t feel it at all.

[ocrenter]

[quote=flu]

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.[/quote]

This is where small business owners really have a step up above all of us. The amount of write off that they can put in as “business expense” is huge.

quite frankly they get so much write off that at the end, they end up below the AMT radar.

AMT is really just a way to bring the upper middle professional class down in line with the middle class. The real rich doesn’t feel it at all.

[ocrenter]

[quote=flu]

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.[/quote]

This is where small business owners really have a step up above all of us. The amount of write off that they can put in as “business expense” is huge.

quite frankly they get so much write off that at the end, they end up below the AMT radar.

AMT is really just a way to bring the upper middle professional class down in line with the middle class. The real rich doesn’t feel it at all.

[ocrenter]

[quote=flu]

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.[/quote]

This is where small business owners really have a step up above all of us. The amount of write off that they can put in as “business expense” is huge.

quite frankly they get so much write off that at the end, they end up below the AMT radar.

AMT is really just a way to bring the upper middle professional class down in line with the middle class. The real rich doesn’t feel it at all.

[Author]

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