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Old 08-13-2012, 07:24 PM
 
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A fair trade off to most middle to upper middle class (those in high state income tax states like CA, MD, NY, NJ etc) is to get rid of mortgage tax deduction but also eliminate the AMT.

My sister's AMT hit is over $12k (that's cash $12k) in Marylamd She also ends up payyijg higher 20% rate on long term capital gains taxes plus loses her kids deduction and also her $15k property tax dedcution.

So get rid of mortgage interest deduction but get rid of AMT at same time.

Fair trade.

Remember AMT was tax invented by Dems and hurts middle and upper middle class the most. How ironic cause the top 2-3% escape the AMT.
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Old 08-13-2012, 07:31 PM
 
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the capital gains rate has not changed yet. it may change to 20% in 2013 but so far your sister didnt pay more than 15%. the amt does penalize all other income though. i get hit with it every so ofton. the worst part is i get hit 2 years in a row.

we get hit the first year by large capital gains if we sell some of our apartments off.

the 2nd year we get hit again because living in nyc our payment to the state is so high when we pay our taxes that the deduction for it trips the amt the next year .

The mortgage deduction is a rebate of taxes or interest paid on a house.

The amt is to stop folks over a certain income from having personal deductions wiping away their share of tax liability.

Once you have so many deductions that your tax liability drops below a certain level relative to income your on a flat tax system.

Im in favor of raising the thresholds on the amt but its only fair that those that wont be paying their fair share of taxes do have a minimum trip point.

Without the amt if i had the dough i could buy six homes,write off my real estate taxes and have no tax liability at all.

Last edited by mathjak107; 08-13-2012 at 08:12 PM..
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Old 08-13-2012, 08:21 PM
 
576 posts, read 811,170 times
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As a future homebuyer I hope that the deduction eventually goes away. I've posted similar comments in other threads related to the topic.

I fundamentally disagree with the interest deduction. It incentivizes people to keep debt and not pay off their home. It disproportionately favors homeowners over renters. It's also another factor pushing up and inflating home prices. It's better for people to pay lower prices for homes and pay less interest, than get a small return from the government on interest paid.

My main problem with the HMID though is that I don't think the government needs to incentivize or encourage home ownership. Renting is a perfectly viable option for many people. But that goes for everything in the tax code, I don't think the government should use taxes as a means to encourage or discourage certain economic sectors, behaviors, etc" But if I were to propose eliminating the HMID over time, it should include a comparable drop in overall taxes.

I would like to see it phased out over time, so as not to punish those that used it to compute how much house they could afford.
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Old 08-13-2012, 08:38 PM
 
Location: NJ/NY
8,092 posts, read 8,414,681 times
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Quote:
Originally Posted by mathjak107 View Post
the capital gains rate has not changed yet. it may change to 20% in 2013 but so far your sister didnt pay more than 15%. the amt does penalize all other income though. i get hit with it every so ofton. the worst part is i get hit 2 years in a row.

we get hit the first year by large capital gains if we sell some of our apartments off.

the 2nd year we get hit again because living in nyc our payment to the state is so high when we pay our taxes that the deduction for it trips the amt the next year .

The mortgage deduction is a rebate of taxes or interest paid on a house.

The amt is to stop folks over a certain income from having personal deductions wiping away their share of tax liability.

Once you have so many deductions that your tax liability drops below a certain level relative to income your on a flat tax system.

Im in favor of raising the thresholds on the amt but its only fair that those that wont be paying their fair share of taxes do have a minimum trip point.

Without the amt if i had the dough i could buy six homes,write off my real estate taxes and have no tax liability at all.
I could be wrong, but I don't think my mortgage interest is subject to the AMT.

What stands in the way of your scenario is that only first and second homes are eligible. A 3rd property automatically gets hit with the AMT.
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Old 08-13-2012, 08:56 PM
 
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As mentioned, the Mortgage deduction is a holdover from the days when any form of interest was deductible
A Brief History of the Mortgage Interest Deduction | The Big Picture

Even as a new homeowner I think we should get rid of it along with every other deduction and tax credit. Mortgage interest, student loan interest, child tax credits, corporate deductions, corporate tax credits, you name it. Get rid of them all and simplify the damn thing.

Politically of course that's going to be nigh impossible. People view credits/deductions that others get as welfare or subsidies but when they take a deduction or credit they think it's completely deserved.
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Old 08-14-2012, 02:01 AM
 
576 posts, read 811,170 times
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Quote:
Originally Posted by FL2MT View Post
As mentioned, the Mortgage deduction is a holdover from the days when any form of interest was deductible
A Brief History of the Mortgage Interest Deduction | The Big Picture

Even as a new homeowner I think we should get rid of it along with every other deduction and tax credit. Mortgage interest, student loan interest, child tax credits, corporate deductions, corporate tax credits, you name it. Get rid of them all and simplify the damn thing.

Politically of course that's going to be nigh impossible. People view credits/deductions that others get as welfare or subsidies but when they take a deduction or credit they think it's completely deserved.
Agree 100%, it's time for us to stop fighting each other to the front of the line for the scraps the government hands out in terms of credits/deduction/subsidies. Everbody is all for this until their specific subsidy they require is under the chopping block. It divides people. It would be much better to end all of these and simplify everything.
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Old 08-14-2012, 03:26 AM
 
54,930 posts, read 57,397,731 times
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Quote:
Originally Posted by AnesthesiaMD View Post
I could be wrong, but I don't think my mortgage interest is subject to the AMT.

What stands in the way of your scenario is that only first and second homes are eligible. A 3rd property automatically gets hit with the AMT.
real estate taxes are subject to it, mortage interest is not. you are correct
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Old 08-14-2012, 03:33 AM
 
54,930 posts, read 57,397,731 times
Reputation: 35158
Quote:
Originally Posted by msdmoney View Post
As a future homebuyer I hope that the deduction eventually goes away. I've posted similar comments in other threads related to the topic.

I fundamentally disagree with the interest deduction. It incentivizes people to keep debt and not pay off their home. It disproportionately favors homeowners over renters. It's also another factor pushing up and inflating home prices. It's better for people to pay lower prices for homes and pay less interest, than get a small return from the government on interest paid.

My main problem with the HMID though is that I don't think the government needs to incentivize or encourage home ownership. Renting is a perfectly viable option for many people. But that goes for everything in the tax code, I don't think the government should use taxes as a means to encourage or discourage certain economic sectors, behaviors, etc" But if I were to propose eliminating the HMID over time, it should include a comparable drop in overall taxes.

I would like to see it phased out over time, so as not to punish those that used it to compute how much house they could afford.
i would disagree, you pay a huge penalty for taking a mortgage. that would be mortgage interest.
paying 2 to 3x the price of the house isnt a good thing.

unless you have better use for the money only an idiot would carry a mortgage to get a deduction. why spend 4 bucks to get one back?

on the surface it appears the homeowner is favored over the renter but in reality its the other way round.

a homeowner couple has to pull 11,800.00 of real money out of their pocket to get over and above the standard deduction before they see the first dollar come back. those deductable expenses are over and above the cost of the house.

its possible a renter may actually see 5 or 6k come out of pocket and they get to bank the rest of the standard deduction getting money back without spending it.

Last edited by mathjak107; 08-14-2012 at 04:35 AM..
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Old 08-14-2012, 02:40 PM
 
576 posts, read 811,170 times
Reputation: 613
Quote:
Originally Posted by mathjak107 View Post
i would disagree, you pay a huge penalty for taking a mortgage. that would be mortgage interest.
paying 2 to 3x the price of the house isnt a good thing.

unless you have better use for the money only an idiot would carry a mortgage to get a deduction. why spend 4 bucks to get one back?

on the surface it appears the homeowner is favored over the renter but in reality its the other way round.

a homeowner couple has to pull 11,800.00 of real money out of their pocket to get over and above the standard deduction before they see the first dollar come back. those deductable expenses are over and above the cost of the house.

its possible a renter may actually see 5 or 6k come out of pocket and they get to bank the rest of the standard deduction getting money back without spending it.
I don't think we disagree, I wasn't speaking about taking out a mortgage vs renting, I was specifically talking about the mortgage interest deduction and it's impact. The deduction itself favors buyers, whether or not that deduction combined with your mortgage is a smarter financial move is a different question entirely.
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Old 08-14-2012, 03:43 PM
 
Location: The North
4,710 posts, read 7,993,856 times
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It has very little impact on home prices right now, its the perfect time to get rid of it. When interest rates were 7% the deduction kicked in on around $200k homes. Now its over $350k and of course home prices are mostly lower. This is a populist relic from the 80s when people had 20% rates and it seemed like home buying would collapse. It meant something significant back then.

Yet another policy move almost everyone who pays any attention would agree to, but we have the anti-tax people in power and alll their "pledges" not to raise taxes a dime to deal with. It wont ever get done until someone stands up to them.
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