Posted on 01/03/2018 6:02:20 AM PST by Kaslin
Renters came out winners under the new tax law. For over a century, the federal tax code catered to homeowners and treated renters like second-class citizens. Homeowners have been able to deduct interest on their mortgages and home equity loans, as well as property taxes. Meanwhile, everyone, including renters, footed the bill for these deductions by paying higher rates. The new tax law at last begins leveling the playing field between renters and homeowners.
Millions of New Yorkers and Californians reap the benefits, because these states have among the lowest rates of homeownership in the nation, and renting is common. So ignore the hyperventilating from Democratic politicians that tax reform is a gift to the rich.
New York Senator Chuck Schumer condemns the new tax law as "a gut shot to the middle class" while "rewarding the wealthiest among us." Just the opposite is true. Tax reform benefits renters living in urban areas -- a key Democratic constituency.
Democrats are usually eager to slap taxes on millionaires. But today, they're defending deductions that benefit only the wealthiest homeowners in the country's most expensive East and West Coast enclaves. Places like Westchester County, New York, and Marin County, California.
Under the new tax law, everyone -- renters and homeowners alike -- will have their tax rates cut and their standard deduction almost doubled. Most will end up paying less tax. To cover the cost of these cuts, the law caps the mortgage deduction for buyers of the priciest real estate. Few homebuyers will even notice it, because they're not borrowing $750,000 or more. Last year, only 4 percent of homebuyers borrowed that much, and only about 100,000 buyers will take out such huge mortgages in 2018.
It's true that the cap will likely hit the wallets of the bicoastal elite. Some 64 percent of buyers in Manhattan's rarefied real estate market took out a mortgage that big, and 58 percent of San Francisco buyers did.
But the tax change certainly won't hurt middle class first-time homebuyers. On average, they buy homes with a median price of $182,500. In the past, the tax code encouraged wealthy homeowners to buy even bigger homes and borrow more. Great for the wealthy and the banks. No much help for the average Joe.
Homeownership isn't any higher than in the late 1960s -- with only 64 percent of households owning their own home. For minorities, the goal is even farther out of reach, with only 46 percent of black families and Hispanic families owning their home. So disregard the partisan claim that lowering the cap on the mortgage interest deduction is going to hurt the middle class.
The other major deduction for homeowners has been property taxes. The new law puts a $10,000 lid on deducting all state and local taxes combined, whether income, sales, or property taxes. Homeowners in most of the nation don't have much to worry about.
Hardest hit are a few tony counties with multimillion dollar homes like Westchester County, New York, where the average property tax tab is a whopping $15,000. For that, the streets should be paved with gold.
But only one-fifth of New York property owners pay over $10,000 and about 30 percent of New Jersey homeowners do.
Schumer rants against the new tax law, claiming it hurts "middle-class and working families." Baloney. Tax reform makes the tax code more progressive, not less. It imposes added costs on the wealthiest homeowners to fund across-the-board tax breaks for all filers. Including renters.
Homeowners still have the option of taking deductions for most mortgage interest and property taxes, but almost all will crunch the numbers and find it pays to take the nearly doubled standard deduction instead. Only 5 percent of filers are expected to itemize.
California's Jerry Brown calls the tax law "evil in the extreme." That's demagoguery. Most taxpayers will end up with more money in their wallets.
Eliminating the deduction for mortgage interest and property taxes means the government will collect more in taxes.
This allowed the government to, in exchange, lower the tax rates for everyone. They also doubled the standard deduction which you can take whether or not you have so much in actual deductions. This applies to everyone.
But it benefits renters WITHOUT THE CORRESPONDING LOSS that owners will experience from the phased out interest and tax deductions.
I remember when that total sales tax used to be just 4 or 4.5 percent. The wheel tax of $5.00 was added in 1967 and it was supposed to be just temporary. Instead they doubled it every so many years (5 I think ) and last year one of the council members wanted to raise it to $75 which would have brought the total renewing fee to over $125.00
i have 8.875% sales tax. Our NY State tax is progressive. If we use the broad bracket of 43000-161,550 its $2093 + 6.45%. If we use 100k its 8.5%. comparable bracket for NYC taxes is $655 +3.76% over 45000.Toss in payroll and other taxes and we’re lucky they don’t ask us to work overtime to catch up on all they want to collect.
It's a sad day when we are forced to view "Not Losing as a Win!"
I guess that follows the logic, "If it didn't kill me it made me a better person!"
>>>it only levels the playing field by taking away a deduction for homeowners<<<
How so? I will continue to deduct my Home Interest and Property Taxes. This Bill only limits Deductions, it does not take them away.
The Loan amount for the Homeowner Mortgage Interest Deduction is capped at $750,000 down from One Million.
Where I live there are Million Dollar Homes, but Banks usually require 20% down, so those Buyers can deduct nearly all the Interest on their $800,000 Mortgages, exempting the Interest on the $50,000 over the limit.
If I were buying a Home today, I could not afford the Home I currently live in which would sell for about $800,000. Is that the Government’s fault or mine?
If I had made better Financial decisions when I was younger, maybe I could afford that much for a Home today. Boo hoo, poor me...
The Property Taxes in CA where I live are capped at 1% of Assessed Value. On a a Million Dollar Home, that cost would be $10,000 a year.
Now the question arises, what is “Middle Class”? Do most Middle Class Families live in Million Dollar Homes?
I have had two Relatives ask me of they will lose their Mortgage Interest Deduction because of the Tax Bill.
They live in Homes worth about $300,000 so it will nt affect them in the slightest. Obviously they depend on the Media to feed them Liberal Propaganda and it apparently works like a charm.
All that being said, I would have liked the Deduction Cap for SALT to be $20,000 instead of $10,000, but over 80% of Taxpayers will still see a decrease in their Federal Taxes.
Unfortunately it’s all part of the Legislative meat grinder.
Are you saying that under the new tax law, mortgage interest moves from being a Schedule A deduction to a deduction to gross income in determining adjusted gross income? I didn’t know that and assumed it was going remain in Schedule A.
I am not qualified to give tax advice and do not know the answer to your question. I only know that in the past, I was able to deduct my mortgage interest from my taxable income. Renters do not get this luxury. I also pay property taxes. Renters do not.
I do not know what deduction went to or from what schedule. Sorry.
Exactly - just like customers and/or employees pay corporate taxes through higher prices or reductions (or foregone increases) in salaries, respectively - which also applies to income taxes on the rich derived from pass through business activities or anytime there exists the ability to shift costs to customers or employees.
Exactly - just like customers and/or employees pay corporate taxes through higher prices or reductions (or foregone increases) in salaries, respectively - which also applies to income taxes on the rich derived from pass through business activities or anytime there exists the ability to shift costs to customers or employees.
If owners lose the tax deduction, I don’t see how this benefits renters. If landlords’ taxes go up (or deductions go down), they will pass that cost to the renters.
Am I missing something?
pretty sure thats how it will work.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.