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Old 07-26-2017, 09:11 AM
 
1,408 posts, read 807,001 times
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Quote:
Originally Posted by SaucyAussie View Post
That doesn't sound right - can one of the tax experts clarify?
You deduct the interest, property taxes, insurance, depreciation, and other expenses, but you most certainly cannot deduct the portion of the mortgage payment that applies to principal.

The funny thing is, though, that many people do deduct their principal repayment but neglect to deduct the depreciation when preparing their taxes themselves. Ultimately the two come close to a wash in most situations such that it wouldn't be worth the IRS's time to audit someone doing it this way. But it's not technically correct.

Another thing a lot of people do wrong is that they deduct the interest and property taxes against their ordinary income, which is incorrect. It can only reduce income earned on the rental unless the individual is a professional landlord. Owning one or two rental properties cannot reduce your ordinary income. This is one that more people get dinged on audit for.
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Old 07-26-2017, 11:44 AM
 
Location: Shawnee-on-Delaware, PA
3,673 posts, read 3,251,579 times
Reputation: 6508
Quote:
Originally Posted by Pub-911 View Post
While investment and business interest were not much affected by the Tax Reform Act of 1986, most personal interest became non-deductible, except for that on personal credit secured by equity. The result was a huge rush to open home equity loans and lines that other interest-bearing balances could be shifted into, thus preserving their deductible nature.
Good thing? Bad thing?
1986? Wow, that's a lot later than I thought. Well, the late 1980's were a boom time and there was seemingly no end to the equity most homeowners could borrow against. Still, apartment dwellers must have felt a bit short-changed and perhaps a few of them were enticed into buying houses jut for the interest deduction.


Good thing or bad thing depends on your point of view I suppose. Americans are still massively in debt to credit card companies so those companies don't seem to have been hurt and consumer habits don't seem to have changed. People who took out loans at 4.0% tax-deductible interest to pay off 18.99% non-deductible credit cards probably think it's a good thing.
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Old 07-26-2017, 12:07 PM
DKM
 
Location: Thousand Oaks, CA
2,060 posts, read 670,106 times
Reputation: 2215
Speaking only for myself, it was the only way I could afford to move to California and house my family. Taking it away would bankrupt me.
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Old 07-26-2017, 01:37 PM
 
Location: Raleigh
6,964 posts, read 5,183,151 times
Reputation: 9390
Quote:
Originally Posted by pvande55 View Post
It would be political suicide to kill it, but it could be greatly debased by increasing the standard deduction.
That's a valid point.

Removing it doesn't change the benefits of owning property, from stabilizing housing costs, stabilizing people and families, and most importantly, "I just feel like my rent check goes to nothing," which is a fallacy on a handful of points but is persistent enough it has to be acknowledged.

But as I see it, the banks like it, builders like it, homeowners like it, the Tax Man is the only one that doesn't.

Even in a Vacuum absent Public Outcry, I don't see Republicans getting behind eliminating a deduction, and I don't see Democrats getting behind removing something that makes home ownership even marginally more attainable.
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Old 07-26-2017, 06:00 PM
 
Location: Idaho
2,476 posts, read 2,013,442 times
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Doesn't bother me at all if it is done away with. But my mortgage is paid down to amost nothing and I plan on never moving from my house until I go out in a black bag.
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Old 07-26-2017, 08:50 PM
 
Location: Kalamalka Lake, B.C.
2,956 posts, read 3,759,379 times
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IN the USA the whole idea behind mortgage interest rate deduction is to get young couples into their first home, when their incomes are on the rise and they have time on their side, but not "cash flow".

What DENMARK has to do with this I don't know. Does it apply? Denmark model is pretty different from the US. Canada doesn't allow mortgage interest deduction, and it sure hasn't stopped us from buying large houses.

But Canadians are known for the "money stuffed into the mattress" approach to investing, so it makes sense we'd prioritize home buying as our main/first money direction. We also have a very large number of Europeans and have followed their model as well. And that was before the Asian invasion.
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Old 07-26-2017, 09:03 PM
 
3,974 posts, read 5,531,265 times
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If you're going to advocate only for the cancellation of this deduction for the individual, you're going to have a really hard time selling why businesses are allowed to keep the multitude of deductions they have for interest and depreciation. Saying that people don't buy houses because of the mortgage interest deduction is like saying entrepreneurs don't start businesses to take depreciation deductions on capital equipment -- of course they don't. However, they do use the tax advantage as a method of helping to pay the bills. You can't really argue that a business with interest on a $500k capital loan is any more deserving of a deduction than a homeowner with a $500k mortgage.
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Old 07-26-2017, 09:07 PM
 
3,974 posts, read 5,531,265 times
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Quote:
Originally Posted by f5fstop View Post
Doesn't bother me at all if it is done away with. But my mortgage is paid down to amost nothing and I plan on never moving from my house until I go out in a black bag.
It's not all that surprising that someone from Idaho who has already taken full advantage of the deduction over a few decades is now not bothered by other people prospectively losing it. It's a common mentality in that neck of the woods.
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Old 07-27-2017, 07:55 AM
 
Location: Beautiful Rhode Island
6,295 posts, read 10,460,438 times
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Quote:
Originally Posted by SportyandMisty View Post
Do People Respond to the Mortgage Interest Deduction?



Perhaps it really is time to get rid of the mortgage interest deduction as a loophole that has outlived its purpose.

What are you a renter? Why would you argue against the best interests of homeowners?
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Old 07-27-2017, 09:03 AM
 
Location: Paranoid State
12,671 posts, read 9,420,097 times
Reputation: 14919
Quote:
Originally Posted by Pub-911 View Post
While investment and business interest were not much affected by the Tax Reform Act of 1986, most personal interest became non-deductible, except for that on personal credit secured by equity. The result was a huge rush to open home equity loans and lines that other interest-bearing balances could be shifted into, thus preserving their deductible nature.
Good thing? Bad thing?
Certainly it is a distortion that would not have happened absent the tax incentive, and as with all such distortions, there are winners and losers. On balance, it is not a good thing.
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