Posted on 12/11/2012 10:37:48 AM PST by whitedog57
There was a nice piece in the Los Angeles Times on the fate of the mortgage interest deduction. President Obama’s deficit commission (aka, Simpson-Bowles) proposed lowering the limit on mortgage principal eligible for a deduction to $500,000 from the current $1 million, removing any break for interest on a second home and turning the deduction into a tax credit capped at 12% of interest paid.
“This is a sacred cow to the real estate industry, and it’s almost an entitlement to homeowners,” said Anthony Sanders, a real estate finance professor at George Mason University. “They could cut it in half and it would not harm a lot of middle-income households.”
According to the Internal Revenue Service, in 2010 only 25% of households used the mortgage interest deduction (of all tax filers). There were 142,856,282 income tax returns filed in 2010, but only 36,362,426 of those filers claimed the mortgage interest deduction.
When I said that the middle class would not be harmed, what I meant was that only 9.82% of households earning between $50,000 and $100,000 used the mortgage interest deduction (although this income segment accounts for 33.41% of all mortgage interest deductions claimed).
But if we consider “the rich” (defined by the Obama Administration as earning $250,000 and more) claim only 1.42% of mortgage interest deductions of all filers, although this groups claims 11.27% of total mortgage interest deductions.
*Given that the homeownership rate is 66% in the US, even I am surprised to see the relatively low level of households actually claiming the mortgage interest deduction. Unless the IRS numbers are wrong, of course.
(Excerpt) Read more at confoundedinterest.wordpress.com ...
Thus it is shown how folks have been driven out of the idea of owning a home and instead are forced to rent. Or they live in big cities where one can only rent an apartment. Why not make rent a tax deduction? Of course, if people can’t own their own property, then it makes it easier for the government to control them by saying “Only the Rich can own property” which is what the colonialists came here to get away from, being renters and serfs of the politically powerful.
Right now the deduction does not apply to homes worth over 1 million bucks. They may half it to 500k. Personally, it doesn’t effect me, I could care less.
You are naive economically. There is no way this would not effect you.
No way Obama pulls the trigger on this one, since halving the deduction to 500K would cost his party the vast majority of voters in the People’s Republic of California, and the Worker’s State of New York.
HEY!! I claim it! Do away with this and it will bury me and my family!
My house is worth far less than 500k. My effective federal tax rate was 8% last year.
I claim it too.
Between this - and the possible AMT trigger....I’ve pretty much decided our family is doomed.
Bread and circuses. All we need are the tunics and we are there...
Now is not the time to be twiddling around with anything that would depress residential real estate further. I don’t care what the justification might be. Leave it alone. If there’s a rational rationale, save it for better times when the market can absorb it. It cannot at present.
Interesting history, in that you post (and excerpt) from a single source:
http://www.freerepublic.com/tag/by:whitedog57/index?tab=articles
Is there a particular reason for you to excerpt this blog?
It’s your blog, right?
Take away the mortgage interest deduction and you might as well kill Schedule A with all of the other Itemized deductions like State Taxes, Medical Deductions, Charitable Donations, Casualty Losses and the rest. I am one who waited for years to be financially able to put my 20% down for a mortgage. Where is President Obama’s legendary ‘FAIRNESS’ in taking away something that I had every reason to trust would continue in my budget?
(Oh, that is right, he hasn’t been able to pass one yet, doh!)
My thoughts exactly. The real estate market is making a feeble comback. Congress’s reaction: stomp it out.
It doesn’t matter what your situation is, any thinking person knows this would be a huge and sudden shock on the entire economy, including the values of every single home out there, regardless of the value. Not only that, selling any home would be more difficult, making them all in effect totally worthless.
You would be screwed too - perhaps more indirectly than directly - but you would be screwed. You don’t live in a bubble.
My mortgage is so low that the deduction is less than the minimum automatic deduction, even itemizing. So it does not benefit me to claim it anymore.
So do you think you are immune to this proposed change?
Home values will drop.
Rent will go up.
I have claimed this deduction for 20 years. It will hurt me and my family if it goes away.
But I have long complained about loopholes and deductions for certain industries and special interests. I feel I would be a hypocrit if I said “absolutely not”. But it should be one of the last deductions to go, not the first.
What this tells us is that there are really only a small percentage of homeowners that have paid their bills, their mortgages, etc. on time and are current enough to actually claim the deduction.
So many who don’t, or haven’t, paid their payments, playing cat and mouse with the foreclosure process - waiting for Uncle Obama to ‘reset’ the slate to ‘fairness’.
Then again, Obama has an awful awful lot of Section 8 home occupiers who could give a damn about claiming any deductions - they get a free deluxe ride on the tax rebates (that they never paid).
So many people have forgotten the allure of going into debt for a house. You’re young and healthy - working. Borrow on a home, get the deduction and PAY IT DOWN! The interest slowly goes down after the massive all-interest payments in the early years. Principal takes over and the debt gets smaller and smaller.
Before the bust, rising home prices led to equity borrowing, refinancing and equity removal and so on. After all, we had jobs and income and the payments could even stay the same or get smaller. Hello sailboat, new car, swimming pools etc.
Now the house ain’t even worth what we owe on it, and Obama is hell-bent-for-leather on taking away that little deduction that can still give us some cash back to pay the taxes on the damned house, car and boat, etc.
He NEEDS that cash so he can still pay his effing leeches. Those so-called Americans that don’t want to work but still live like us - solely because they still have the right to vote - for Obama.
It’s a fine damned mess, ain’t it? I’m just hoping that I’m still around when everyone figures out this dog don’t hunt.
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