Elimination of Mortgage Deduction

[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=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.[/quote]

as far as logic goes. it really doesn’t make sense that state and property taxes are not deductible but mortgage interest is.

after all, isn’t that double taxation on those amount?

[ocrenter]

[quote=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.[/quote]

as far as logic goes. it really doesn’t make sense that state and property taxes are not deductible but mortgage interest is.

after all, isn’t that double taxation on those amount?

[ocrenter]

[quote=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.[/quote]

as far as logic goes. it really doesn’t make sense that state and property taxes are not deductible but mortgage interest is.

after all, isn’t that double taxation on those amount?

[ocrenter]

[quote=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.[/quote]

as far as logic goes. it really doesn’t make sense that state and property taxes are not deductible but mortgage interest is.

after all, isn’t that double taxation on those amount?

[ocrenter]

[quote=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.[/quote]

as far as logic goes. it really doesn’t make sense that state and property taxes are not deductible but mortgage interest is.

after all, isn’t that double taxation on those amount?

[Coronita]

[quote=ocrenter][quote=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.[/quote]

as far as logic goes. it really doesn’t make sense that state and property taxes are not deductible but mortgage interest is.

after all, isn’t that double taxation on those amount?[/quote]

well, to some extent, I think it does. I believe under normal tax calculations, taxes paid on things are deductible, including income tax, property tax, and personal property tax. So if was allowed under AMT, taxes paid by someone for his personal yacht or his N+ vacation homes he uses to hook up with his mistresses would lower his over tax bill if they were not excluded from AMT deductions. (I guess the rationale goes, super rich don’t take out mortgages to buy these things…) The issue with AMT was that is was never adjusted to keep up with inflation. The second big ding about AMT was folks who exercised incentive stock options but didn’t sell in the same year. A lot of people got burned by that bigtime. Most day, companies issue non-qualified so this isn’t an issue…or they make you do a exercise and sell the same day.

[Coronita]

[quote=ocrenter][quote=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.[/quote]

as far as logic goes. it really doesn’t make sense that state and property taxes are not deductible but mortgage interest is.

after all, isn’t that double taxation on those amount?[/quote]

well, to some extent, I think it does. I believe under normal tax calculations, taxes paid on things are deductible, including income tax, property tax, and personal property tax. So if was allowed under AMT, taxes paid by someone for his personal yacht or his N+ vacation homes he uses to hook up with his mistresses would lower his over tax bill if they were not excluded from AMT deductions. (I guess the rationale goes, super rich don’t take out mortgages to buy these things…) The issue with AMT was that is was never adjusted to keep up with inflation. The second big ding about AMT was folks who exercised incentive stock options but didn’t sell in the same year. A lot of people got burned by that bigtime. Most day, companies issue non-qualified so this isn’t an issue…or they make you do a exercise and sell the same day.

[Coronita]

[quote=ocrenter][quote=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.[/quote]

as far as logic goes. it really doesn’t make sense that state and property taxes are not deductible but mortgage interest is.

after all, isn’t that double taxation on those amount?[/quote]

well, to some extent, I think it does. I believe under normal tax calculations, taxes paid on things are deductible, including income tax, property tax, and personal property tax. So if was allowed under AMT, taxes paid by someone for his personal yacht or his N+ vacation homes he uses to hook up with his mistresses would lower his over tax bill if they were not excluded from AMT deductions. (I guess the rationale goes, super rich don’t take out mortgages to buy these things…) The issue with AMT was that is was never adjusted to keep up with inflation. The second big ding about AMT was folks who exercised incentive stock options but didn’t sell in the same year. A lot of people got burned by that bigtime. Most day, companies issue non-qualified so this isn’t an issue…or they make you do a exercise and sell the same day.

[Coronita]

[quote=ocrenter][quote=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.[/quote]

as far as logic goes. it really doesn’t make sense that state and property taxes are not deductible but mortgage interest is.

after all, isn’t that double taxation on those amount?[/quote]

well, to some extent, I think it does. I believe under normal tax calculations, taxes paid on things are deductible, including income tax, property tax, and personal property tax. So if was allowed under AMT, taxes paid by someone for his personal yacht or his N+ vacation homes he uses to hook up with his mistresses would lower his over tax bill if they were not excluded from AMT deductions. (I guess the rationale goes, super rich don’t take out mortgages to buy these things…) The issue with AMT was that is was never adjusted to keep up with inflation. The second big ding about AMT was folks who exercised incentive stock options but didn’t sell in the same year. A lot of people got burned by that bigtime. Most day, companies issue non-qualified so this isn’t an issue…or they make you do a exercise and sell the same day.

[Coronita]

[quote=ocrenter][quote=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.[/quote]

as far as logic goes. it really doesn’t make sense that state and property taxes are not deductible but mortgage interest is.

after all, isn’t that double taxation on those amount?[/quote]

well, to some extent, I think it does. I believe under normal tax calculations, taxes paid on things are deductible, including income tax, property tax, and personal property tax. So if was allowed under AMT, taxes paid by someone for his personal yacht or his N+ vacation homes he uses to hook up with his mistresses would lower his over tax bill if they were not excluded from AMT deductions. (I guess the rationale goes, super rich don’t take out mortgages to buy these things…) The issue with AMT was that is was never adjusted to keep up with inflation. The second big ding about AMT was folks who exercised incentive stock options but didn’t sell in the same year. A lot of people got burned by that bigtime. Most day, companies issue non-qualified so this isn’t an issue…or they make you do a exercise and sell the same day.

[ucodegen]

[quote flu]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.[/quote]
The IRS is increasing their bandwidth. They are now using systems that can ‘read’ and ‘process’ the forms for tax ‘mistakes’. Its not perfect, but it is getting scary.

What the IRS may do is make the interest from an HELOC non-deductible as a default unless you can prove by receipts that the money was spent on improvements to the property. Only the interest on the principal that can be justified by receipts would be allowed.

As for cash-out refi, that would be easier. The interest on the amount that is cashed-out would not be deductible unless there are home improvement receipts for that amount.

[quote joec]Yeah, your idea sounds much better than renting someone else’s house. :)[/quote]
It was from my primitive understanding of how the wealthy were getting around the system before the home mortgage interest deduction was allowed.

[quote 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.[/quote]
Actually it just shifts the tax burden, unless the gov. reduces spending(yeah, right). The total bill has to be paid eventually anyway. You can shift it to different parts of the population, or you can ‘time shift’ it using treasuries (fed borrowing).

[ucodegen]

[quote flu]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.[/quote]
The IRS is increasing their bandwidth. They are now using systems that can ‘read’ and ‘process’ the forms for tax ‘mistakes’. Its not perfect, but it is getting scary.

What the IRS may do is make the interest from an HELOC non-deductible as a default unless you can prove by receipts that the money was spent on improvements to the property. Only the interest on the principal that can be justified by receipts would be allowed.

As for cash-out refi, that would be easier. The interest on the amount that is cashed-out would not be deductible unless there are home improvement receipts for that amount.

[quote joec]Yeah, your idea sounds much better than renting someone else’s house. :)[/quote]
It was from my primitive understanding of how the wealthy were getting around the system before the home mortgage interest deduction was allowed.

[quote 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.[/quote]
Actually it just shifts the tax burden, unless the gov. reduces spending(yeah, right). The total bill has to be paid eventually anyway. You can shift it to different parts of the population, or you can ‘time shift’ it using treasuries (fed borrowing).

[ucodegen]

[quote flu]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.[/quote]
The IRS is increasing their bandwidth. They are now using systems that can ‘read’ and ‘process’ the forms for tax ‘mistakes’. Its not perfect, but it is getting scary.

What the IRS may do is make the interest from an HELOC non-deductible as a default unless you can prove by receipts that the money was spent on improvements to the property. Only the interest on the principal that can be justified by receipts would be allowed.

As for cash-out refi, that would be easier. The interest on the amount that is cashed-out would not be deductible unless there are home improvement receipts for that amount.

[quote joec]Yeah, your idea sounds much better than renting someone else’s house. :)[/quote]
It was from my primitive understanding of how the wealthy were getting around the system before the home mortgage interest deduction was allowed.

[quote 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.[/quote]
Actually it just shifts the tax burden, unless the gov. reduces spending(yeah, right). The total bill has to be paid eventually anyway. You can shift it to different parts of the population, or you can ‘time shift’ it using treasuries (fed borrowing).

[ucodegen]

[quote flu]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.[/quote]
The IRS is increasing their bandwidth. They are now using systems that can ‘read’ and ‘process’ the forms for tax ‘mistakes’. Its not perfect, but it is getting scary.

What the IRS may do is make the interest from an HELOC non-deductible as a default unless you can prove by receipts that the money was spent on improvements to the property. Only the interest on the principal that can be justified by receipts would be allowed.

As for cash-out refi, that would be easier. The interest on the amount that is cashed-out would not be deductible unless there are home improvement receipts for that amount.

[quote joec]Yeah, your idea sounds much better than renting someone else’s house. :)[/quote]
It was from my primitive understanding of how the wealthy were getting around the system before the home mortgage interest deduction was allowed.

[quote 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.[/quote]
Actually it just shifts the tax burden, unless the gov. reduces spending(yeah, right). The total bill has to be paid eventually anyway. You can shift it to different parts of the population, or you can ‘time shift’ it using treasuries (fed borrowing).

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