[SK in CV]

[quote=CA renter]
Agree with you that state/local revenue would probably not change too much.

Commercial RE is another issue entirely, but I would also encourage the ownership of a single commercial/industrial building per person or related entity by giving them Prop 13 protection and also allow the MID on a *single* property (there might be some size limitations). The property should be reassessed any time there is an ownership change. People should not be able to pass on their Prop 13 protection via corporations or LLCs, etc. (which simply increases prices on these properties — the seller gets the benefit, but the taxpayers have to subsidize it).

Additionally, multi-family dwellings (apartment buildings) could retain Prop 13 protection, but I’d like to see a way for tenants to somehow benefit from this as well — a shared benefit of sorts.[/quote]

Prop 13 property tax rules apply to all real property in CA, including commercial and multi-unit residential. I suspect it has little or no effect on market rents. Outside of SFRs, rents follow a pretty standard supply and demand model. Values follow income, not the other way around.

[SK in CV]

[quote=CA renter]
Agree with you that state/local revenue would probably not change too much.

Commercial RE is another issue entirely, but I would also encourage the ownership of a single commercial/industrial building per person or related entity by giving them Prop 13 protection and also allow the MID on a *single* property (there might be some size limitations). The property should be reassessed any time there is an ownership change. People should not be able to pass on their Prop 13 protection via corporations or LLCs, etc. (which simply increases prices on these properties — the seller gets the benefit, but the taxpayers have to subsidize it).

Additionally, multi-family dwellings (apartment buildings) could retain Prop 13 protection, but I’d like to see a way for tenants to somehow benefit from this as well — a shared benefit of sorts.[/quote]

Prop 13 property tax rules apply to all real property in CA, including commercial and multi-unit residential. I suspect it has little or no effect on market rents. Outside of SFRs, rents follow a pretty standard supply and demand model. Values follow income, not the other way around.

[SK in CV]

[quote=CA renter]
Agree with you that state/local revenue would probably not change too much.

Commercial RE is another issue entirely, but I would also encourage the ownership of a single commercial/industrial building per person or related entity by giving them Prop 13 protection and also allow the MID on a *single* property (there might be some size limitations). The property should be reassessed any time there is an ownership change. People should not be able to pass on their Prop 13 protection via corporations or LLCs, etc. (which simply increases prices on these properties — the seller gets the benefit, but the taxpayers have to subsidize it).

Additionally, multi-family dwellings (apartment buildings) could retain Prop 13 protection, but I’d like to see a way for tenants to somehow benefit from this as well — a shared benefit of sorts.[/quote]

Prop 13 property tax rules apply to all real property in CA, including commercial and multi-unit residential. I suspect it has little or no effect on market rents. Outside of SFRs, rents follow a pretty standard supply and demand model. Values follow income, not the other way around.

[SK in CV]

[quote=CA renter]
Agree with you that state/local revenue would probably not change too much.

Commercial RE is another issue entirely, but I would also encourage the ownership of a single commercial/industrial building per person or related entity by giving them Prop 13 protection and also allow the MID on a *single* property (there might be some size limitations). The property should be reassessed any time there is an ownership change. People should not be able to pass on their Prop 13 protection via corporations or LLCs, etc. (which simply increases prices on these properties — the seller gets the benefit, but the taxpayers have to subsidize it).

Additionally, multi-family dwellings (apartment buildings) could retain Prop 13 protection, but I’d like to see a way for tenants to somehow benefit from this as well — a shared benefit of sorts.[/quote]

Prop 13 property tax rules apply to all real property in CA, including commercial and multi-unit residential. I suspect it has little or no effect on market rents. Outside of SFRs, rents follow a pretty standard supply and demand model. Values follow income, not the other way around.

[SK in CV]

[quote=CA renter]
Perhaps it’s because I don’t believe in changing the rules after the game has started, but I think the elimination of the MID should not affect existing mortgages; they should be grandfathered in.

This would probably cause housing prices to fall and local/state governments to see lower revenues, but that’s not really a bad thing, IMHO (I don’t think it would be a drastic change).
——————

As far as the MID on second homes and rentals, I think that should be eliminated entirely.

If you think about it, the mortgage interest is an expense that the LL **chooses to add** to the legitimate expenses of owning and maintaining rental properties (repairs, maintenance, advertising, management fees, etc.). A leveraged landlord should not be entitled to more deductions than a LL who owns a property outright. This means that taxpayers are subsidizing a LL’s use of leverage. Leverage is their problem, not ours.

The only way I would allow the MID on rentals would be if the LL agreed to some form of rent control. This should also apply to Prop 13 protection — the benefit of the lower property taxes does not usually go to the renter (more affordable housing), it goes to the landlord.

There is no reason for taxpayers to subsidize a landlord’s profits or use of leverage.[/quote]

Changing the rules happens all the time. Near perfect examples are the elimination of the deduction for personal interest, and limitations on deductions for home equity interest. Taxes on cap gains change pretty regularly.

State and local revenues might only drop in CA where property taxes are statutorily tied to values. (I think CA is unique in that regards.) Other states figure out how much they need and set the rates accordingly. I’m not convinced that values would drop significantly even in CA.

You’re opposed to changing the rules mid-game for mortgage interest. But not opposed to changing the rules mid-game for 2nd home interest? And apparently not opposed to changing the rules mid-game for rental property?

Related to the deduction of interest on rental properties, it’s an entirely different issue. Unlikely to happen. It would kill prices way worse than doing away with the home mortgage deduction. Rent control on commercial property? I don’t think either is going to happen, or even be proposed in good faith. (Other than different depreciable lives, I can’t think of any tax differences between residential and commercial rental property. Same tax code sections which determine what is deductible cover both.) Are you going to tell Jerry Jones that he can’t deduct the mortgage interest on his new stadium and someone else is going to tell him how much rent he can charge the cowboys to play there? Nope, that one isn’t going to happen.

[SK in CV]

[quote=CA renter]
Perhaps it’s because I don’t believe in changing the rules after the game has started, but I think the elimination of the MID should not affect existing mortgages; they should be grandfathered in.

This would probably cause housing prices to fall and local/state governments to see lower revenues, but that’s not really a bad thing, IMHO (I don’t think it would be a drastic change).
——————

As far as the MID on second homes and rentals, I think that should be eliminated entirely.

If you think about it, the mortgage interest is an expense that the LL **chooses to add** to the legitimate expenses of owning and maintaining rental properties (repairs, maintenance, advertising, management fees, etc.). A leveraged landlord should not be entitled to more deductions than a LL who owns a property outright. This means that taxpayers are subsidizing a LL’s use of leverage. Leverage is their problem, not ours.

The only way I would allow the MID on rentals would be if the LL agreed to some form of rent control. This should also apply to Prop 13 protection — the benefit of the lower property taxes does not usually go to the renter (more affordable housing), it goes to the landlord.

There is no reason for taxpayers to subsidize a landlord’s profits or use of leverage.[/quote]

Changing the rules happens all the time. Near perfect examples are the elimination of the deduction for personal interest, and limitations on deductions for home equity interest. Taxes on cap gains change pretty regularly.

State and local revenues might only drop in CA where property taxes are statutorily tied to values. (I think CA is unique in that regards.) Other states figure out how much they need and set the rates accordingly. I’m not convinced that values would drop significantly even in CA.

You’re opposed to changing the rules mid-game for mortgage interest. But not opposed to changing the rules mid-game for 2nd home interest? And apparently not opposed to changing the rules mid-game for rental property?

Related to the deduction of interest on rental properties, it’s an entirely different issue. Unlikely to happen. It would kill prices way worse than doing away with the home mortgage deduction. Rent control on commercial property? I don’t think either is going to happen, or even be proposed in good faith. (Other than different depreciable lives, I can’t think of any tax differences between residential and commercial rental property. Same tax code sections which determine what is deductible cover both.) Are you going to tell Jerry Jones that he can’t deduct the mortgage interest on his new stadium and someone else is going to tell him how much rent he can charge the cowboys to play there? Nope, that one isn’t going to happen.

[SK in CV]

[quote=CA renter]
Perhaps it’s because I don’t believe in changing the rules after the game has started, but I think the elimination of the MID should not affect existing mortgages; they should be grandfathered in.

This would probably cause housing prices to fall and local/state governments to see lower revenues, but that’s not really a bad thing, IMHO (I don’t think it would be a drastic change).
——————

As far as the MID on second homes and rentals, I think that should be eliminated entirely.

If you think about it, the mortgage interest is an expense that the LL **chooses to add** to the legitimate expenses of owning and maintaining rental properties (repairs, maintenance, advertising, management fees, etc.). A leveraged landlord should not be entitled to more deductions than a LL who owns a property outright. This means that taxpayers are subsidizing a LL’s use of leverage. Leverage is their problem, not ours.

The only way I would allow the MID on rentals would be if the LL agreed to some form of rent control. This should also apply to Prop 13 protection — the benefit of the lower property taxes does not usually go to the renter (more affordable housing), it goes to the landlord.

There is no reason for taxpayers to subsidize a landlord’s profits or use of leverage.[/quote]

Changing the rules happens all the time. Near perfect examples are the elimination of the deduction for personal interest, and limitations on deductions for home equity interest. Taxes on cap gains change pretty regularly.

State and local revenues might only drop in CA where property taxes are statutorily tied to values. (I think CA is unique in that regards.) Other states figure out how much they need and set the rates accordingly. I’m not convinced that values would drop significantly even in CA.

You’re opposed to changing the rules mid-game for mortgage interest. But not opposed to changing the rules mid-game for 2nd home interest? And apparently not opposed to changing the rules mid-game for rental property?

Related to the deduction of interest on rental properties, it’s an entirely different issue. Unlikely to happen. It would kill prices way worse than doing away with the home mortgage deduction. Rent control on commercial property? I don’t think either is going to happen, or even be proposed in good faith. (Other than different depreciable lives, I can’t think of any tax differences between residential and commercial rental property. Same tax code sections which determine what is deductible cover both.) Are you going to tell Jerry Jones that he can’t deduct the mortgage interest on his new stadium and someone else is going to tell him how much rent he can charge the cowboys to play there? Nope, that one isn’t going to happen.

[SK in CV]

[quote=CA renter]
Perhaps it’s because I don’t believe in changing the rules after the game has started, but I think the elimination of the MID should not affect existing mortgages; they should be grandfathered in.

This would probably cause housing prices to fall and local/state governments to see lower revenues, but that’s not really a bad thing, IMHO (I don’t think it would be a drastic change).
——————

As far as the MID on second homes and rentals, I think that should be eliminated entirely.

If you think about it, the mortgage interest is an expense that the LL **chooses to add** to the legitimate expenses of owning and maintaining rental properties (repairs, maintenance, advertising, management fees, etc.). A leveraged landlord should not be entitled to more deductions than a LL who owns a property outright. This means that taxpayers are subsidizing a LL’s use of leverage. Leverage is their problem, not ours.

The only way I would allow the MID on rentals would be if the LL agreed to some form of rent control. This should also apply to Prop 13 protection — the benefit of the lower property taxes does not usually go to the renter (more affordable housing), it goes to the landlord.

There is no reason for taxpayers to subsidize a landlord’s profits or use of leverage.[/quote]

Changing the rules happens all the time. Near perfect examples are the elimination of the deduction for personal interest, and limitations on deductions for home equity interest. Taxes on cap gains change pretty regularly.

State and local revenues might only drop in CA where property taxes are statutorily tied to values. (I think CA is unique in that regards.) Other states figure out how much they need and set the rates accordingly. I’m not convinced that values would drop significantly even in CA.

You’re opposed to changing the rules mid-game for mortgage interest. But not opposed to changing the rules mid-game for 2nd home interest? And apparently not opposed to changing the rules mid-game for rental property?

Related to the deduction of interest on rental properties, it’s an entirely different issue. Unlikely to happen. It would kill prices way worse than doing away with the home mortgage deduction. Rent control on commercial property? I don’t think either is going to happen, or even be proposed in good faith. (Other than different depreciable lives, I can’t think of any tax differences between residential and commercial rental property. Same tax code sections which determine what is deductible cover both.) Are you going to tell Jerry Jones that he can’t deduct the mortgage interest on his new stadium and someone else is going to tell him how much rent he can charge the cowboys to play there? Nope, that one isn’t going to happen.

[SK in CV]

[quote=CA renter]
Perhaps it’s because I don’t believe in changing the rules after the game has started, but I think the elimination of the MID should not affect existing mortgages; they should be grandfathered in.

This would probably cause housing prices to fall and local/state governments to see lower revenues, but that’s not really a bad thing, IMHO (I don’t think it would be a drastic change).
——————

As far as the MID on second homes and rentals, I think that should be eliminated entirely.

If you think about it, the mortgage interest is an expense that the LL **chooses to add** to the legitimate expenses of owning and maintaining rental properties (repairs, maintenance, advertising, management fees, etc.). A leveraged landlord should not be entitled to more deductions than a LL who owns a property outright. This means that taxpayers are subsidizing a LL’s use of leverage. Leverage is their problem, not ours.

The only way I would allow the MID on rentals would be if the LL agreed to some form of rent control. This should also apply to Prop 13 protection — the benefit of the lower property taxes does not usually go to the renter (more affordable housing), it goes to the landlord.

There is no reason for taxpayers to subsidize a landlord’s profits or use of leverage.[/quote]

Changing the rules happens all the time. Near perfect examples are the elimination of the deduction for personal interest, and limitations on deductions for home equity interest. Taxes on cap gains change pretty regularly.

State and local revenues might only drop in CA where property taxes are statutorily tied to values. (I think CA is unique in that regards.) Other states figure out how much they need and set the rates accordingly. I’m not convinced that values would drop significantly even in CA.

You’re opposed to changing the rules mid-game for mortgage interest. But not opposed to changing the rules mid-game for 2nd home interest? And apparently not opposed to changing the rules mid-game for rental property?

Related to the deduction of interest on rental properties, it’s an entirely different issue. Unlikely to happen. It would kill prices way worse than doing away with the home mortgage deduction. Rent control on commercial property? I don’t think either is going to happen, or even be proposed in good faith. (Other than different depreciable lives, I can’t think of any tax differences between residential and commercial rental property. Same tax code sections which determine what is deductible cover both.) Are you going to tell Jerry Jones that he can’t deduct the mortgage interest on his new stadium and someone else is going to tell him how much rent he can charge the cowboys to play there? Nope, that one isn’t going to happen.

[SK in CV]

[quote=bearishgurl][quote=XBoxBoy]. . . for someone to save 20k off their tax bill wouldn’t that have to pay over 50k a year in interest? Does anyone think the average californian who’s paying a mortgage is paying over 50k a year in motgage interest?[/quote]

As far as I know XBoxBoy, mortgage interest is only deductible up to $25K per year. Folks who are paying more interest than that can only deduct $25K of it.

Any accountant geek-Piggs out there reading this please correct me if this law has changed.[/quote]

Nope. Purchase money debt is deductible, up to a $1 million in debt, without regards to the dollar amount of the interest. Million dollar loan at 18% fixed, interest only, you get a deduction of $180,000. There are some limitations on non-purchase money debt, but they’re all related to the debt, not the dollar amount of interest.

The only $25,000 limitation that comes to mind is for passive losses for investments with active participation, most commonly related to rental property losses.

[SK in CV]

[quote=bearishgurl][quote=XBoxBoy]. . . for someone to save 20k off their tax bill wouldn’t that have to pay over 50k a year in interest? Does anyone think the average californian who’s paying a mortgage is paying over 50k a year in motgage interest?[/quote]

As far as I know XBoxBoy, mortgage interest is only deductible up to $25K per year. Folks who are paying more interest than that can only deduct $25K of it.

Any accountant geek-Piggs out there reading this please correct me if this law has changed.[/quote]

Nope. Purchase money debt is deductible, up to a $1 million in debt, without regards to the dollar amount of the interest. Million dollar loan at 18% fixed, interest only, you get a deduction of $180,000. There are some limitations on non-purchase money debt, but they’re all related to the debt, not the dollar amount of interest.

The only $25,000 limitation that comes to mind is for passive losses for investments with active participation, most commonly related to rental property losses.

[SK in CV]

[quote=bearishgurl][quote=XBoxBoy]. . . for someone to save 20k off their tax bill wouldn’t that have to pay over 50k a year in interest? Does anyone think the average californian who’s paying a mortgage is paying over 50k a year in motgage interest?[/quote]

As far as I know XBoxBoy, mortgage interest is only deductible up to $25K per year. Folks who are paying more interest than that can only deduct $25K of it.

Any accountant geek-Piggs out there reading this please correct me if this law has changed.[/quote]

Nope. Purchase money debt is deductible, up to a $1 million in debt, without regards to the dollar amount of the interest. Million dollar loan at 18% fixed, interest only, you get a deduction of $180,000. There are some limitations on non-purchase money debt, but they’re all related to the debt, not the dollar amount of interest.

The only $25,000 limitation that comes to mind is for passive losses for investments with active participation, most commonly related to rental property losses.

[SK in CV]

[quote=bearishgurl][quote=XBoxBoy]. . . for someone to save 20k off their tax bill wouldn’t that have to pay over 50k a year in interest? Does anyone think the average californian who’s paying a mortgage is paying over 50k a year in motgage interest?[/quote]

As far as I know XBoxBoy, mortgage interest is only deductible up to $25K per year. Folks who are paying more interest than that can only deduct $25K of it.

Any accountant geek-Piggs out there reading this please correct me if this law has changed.[/quote]

Nope. Purchase money debt is deductible, up to a $1 million in debt, without regards to the dollar amount of the interest. Million dollar loan at 18% fixed, interest only, you get a deduction of $180,000. There are some limitations on non-purchase money debt, but they’re all related to the debt, not the dollar amount of interest.

The only $25,000 limitation that comes to mind is for passive losses for investments with active participation, most commonly related to rental property losses.

[SK in CV]

[quote=bearishgurl][quote=XBoxBoy]. . . for someone to save 20k off their tax bill wouldn’t that have to pay over 50k a year in interest? Does anyone think the average californian who’s paying a mortgage is paying over 50k a year in motgage interest?[/quote]

As far as I know XBoxBoy, mortgage interest is only deductible up to $25K per year. Folks who are paying more interest than that can only deduct $25K of it.

Any accountant geek-Piggs out there reading this please correct me if this law has changed.[/quote]

Nope. Purchase money debt is deductible, up to a $1 million in debt, without regards to the dollar amount of the interest. Million dollar loan at 18% fixed, interest only, you get a deduction of $180,000. There are some limitations on non-purchase money debt, but they’re all related to the debt, not the dollar amount of interest.

The only $25,000 limitation that comes to mind is for passive losses for investments with active participation, most commonly related to rental property losses.

[SK in CV]

Great catch on this.

[quote=XBoxBoy]Whoa! Wait a minute!!!

I’m either completely wrong or completely stunned. Here’s an article on the Wall Street Journal site that says: “Californians that claimed the mortgage interest rate deduction saved an average of almost $20,000 from their tax bill in 2008”

Then when you look at the chart it revels that the average DEDUCTION is $18,876 for California.

Now unless I’m mistaken, and been messin’ up on my taxes for years, a deduction is not the same thing as saving that amount off your tax bill. Doesn’t a writer for the Wall Street Journal know this???

Am I completely wrong??????????

Seems to me that a tax deduction for interest of $18,876 is worth at best 5 or 6k off your tax bill, and given you lose the standard deduction when itemizing (which you gotta do to take the interest) this author is waaaayyyyy off base with his claim.

XBoxBoy,

ps. for someone to save 20k off their tax bill wouldn’t that have to pay over 50k a year in interest? Does anyone think the average californian who’s paying a mortgage is paying over 50k a year in motgage interest?[/quote]

When I first read that, i’m thinking, wow, that can’t possibly be right. And it’s not. Crappy reporting. (Let’s give credit where it’s due. That crappy reporting was done by Conor Dougherty of the WSG Blog.) The average deduction is almost $20,000. Maximum tax savings would be about $7,600. About $635 a month for an average mortgage deduction in the highest tax bracket. ymmv.

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