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when we talk about people who itemize we are referring to those not taking the standard deduction .
"Under United States tax law, itemized deductions are eligible expenses that individual taxpayers can claim on federal income tax returns and which decrease their taxable income, and is claimable in place of a standard deduction, "
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Realtors and finance companies have a very powerful lobby (And they love to strap millions of home owners into the thought that Mortgage deduction is a net positive for a home owner.
Wrong. simple math.
Less that 10 % of sales would be lost due to excluding this deduction, and those folks need further math education anyway.
Cash sales will only increase in the future.
The mortgage industry in USA is another INTEREST(ing) opportunity for sharks and enablers of sharks. That should have been clipped in the financial crisis as low hanging fruit. (that needs a good pruning)
The tax deductibility helped make that situation. Without it people would think twice before moving to over-priced areas and houses in them wouldn't be fetching as much.
Sales prices for exiting homes are typically determined through negotiation and agreement between a willing buyer and a willing seller. Against that backdrop, "over-priced" tends simply to mean an amount that some third party would not have been able or willing to pay.
They do to the extent that deductibility enables buyers to enter higher bids for a home, knowing that their carrying costs for the home will be significantly subsidized in the early years of a mortgage.
I would wager very few people actually calculate their net costs prior to purchase or in reality much of an estimate.
You would lose that wager by a very substantial margin. There is no more important calculation to first-time buyers, while experienced homeowners are apt to know better than simply to fly blind. A home, after all, is the largest single investment that most people will ever hold. It isn't like deciding whether to buy a Slurpee and a Big Bite for lunch or maybe step up and have a frou-frou salad instead.
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Originally Posted by Lowexpectations
I believe mortgage Approvals are based on gross income too so the reality is most people are ignorant to the math, not that the perception alone might not force a negative outcome
??? People apply for mortgages after they have determined that a property that they deem desirable and affordable is available in the market.
No reason the deduction couldn't be phased out slowly over a period of several years.
Define "several". Keep in mind that the problem here is the gulf of difference that would be created in markets between "old order" sellers and "new order" buyers. Simply expecting the former to start accepting substantial capital losses is not going to be an effective strategy.
That's consonant with numbers I've seen and heard, locally and nationally. Gobs of investor cash (foreign and domestic) coming in.
That's principally the latest blip in global capital flows. With continued weakness in Asian, BRIC, and European economies, interest in dollar-denominated assets is up. No more QE here, stable growth in US GDP, and expectations for rising interest rates all provide a push in the same direction. This is not a local real estate issue, but rather the invasion of ongoing ebbs and flows in global capital markets.
Define "several". Keep in mind that the problem here is the gulf of difference that would be created between "old order" sellers and "new order" buyers. Simply expecting the former to start accepting substantial capital losses is not going to be a workable strategy.
I would be perfectly willing to take a 10% loss in my house's value when selling it if I could get a similar 10% discount on the house I was buying. I don't think that the impact would be more than a few percent at most, though. If I look at the the total costs of home ownership over the last 8 years I have owned my house, the interest deduction that I have gotten from itemizing is a fraction of a percent. The "luck" that I had when my son was born in December as opposed to a few days later in January accounted for a far bigger tax benefit than mortgage interest deduction.
As it was originally stated, I think the biggest impact would be on building new homes, as homebuilders would need to increase the premium that they charge over existing construction if the existing houses declined in value.
Truthfully it's such a small amount that for me it doesn't do that much. I have a high enough income that it really is just a little help.
The higher your income, the higher your marginal tax rate, and the more the HMI deduction is worth to you.
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Originally Posted by Electrician4you
For example I go every 3 months and buy about 3-400 bucks worth of pet food and take it to my local shelter. It's about 1200 bucks a year. It's something I enjoy doing. I get to deduct I think $400 of that 1200.
You get to deduct all of it. If you were in the 25% tax bracket, that $1200 deduction would net you a $300 reduction in your tax bill.
But you would do better work in simply sending the $1200 to the shelter directly. They can do a better job of leveraging cash into needed goods and services than what you as an individual can accomplish. That said, if (as it is for many people) the hands-on, touchy-feely aspect of hauling bags of groceries around is a significant motivator to your contributions, please continue to do exactly what you have been doing. In-kind donations are indeed a very important thing to shelters and such.
Sales prices for exiting homes are typically determined through negotiation and agreement between a willing buyer and a willing seller. Against that backdrop, "over-priced" tends simply to mean an amount that some third party would not have been able or willing to pay.
The value of the interest deduction reduces the effective price to the buyer. That's the whole point of having it. It makes it easier for people to afford a house, increasing demand. A $1 million house that's affordable because of the interest deduction would be less affordable without it. Fewer people afford it and fewer would bid on it.
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when we talk about people who itemize we are referring to those not taking the standard deduction .
