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Old 08-16-2017, 12:54 PM
 
2,252 posts, read 1,393,549 times
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Quote:
Originally Posted by GeoffD View Post
Look at any study on socioeconomic class mobility in the United States. The Economist did a huge spread on it last year. If you're in the bottom quintile, your odds of escaping are really low. If you're born to the top quintile, the odds are really high that you'll remain there. The US now has the worst socioeconomic class mobility in the first world.

Citing specific examples in a population of 323 million is statistically invalid.
Yeah, the strongest positive indicator that will drive your income in adulthood, is your parent's income. The strongest negative driver is being born to a single parent household. In other words, the two greatest contributing factors are totally outside of a persons control.

Many can and have rose above these issues. But it's a long shot. Two strikes against you at the outset can change your ending destination markedly.

Of course, the bootstrap crowd will never admit they ever got lucky breaks or had help along their rise to greatness.
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Old 08-16-2017, 01:03 PM
 
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Quote:
Originally Posted by Thatsright19 View Post
Yeah, the strongest positive indicator that will drive your income in adulthood, is your parent's income. The strongest negative driver is being born to a single parent household. In other words, the two greatest contributing factors are totally outside of a persons control.

Many can and have rose above these issues. But it's a long shot. Two strikes against you at the outset can change your ending destination markedly.

Of course, the bootstrap crowd will never admit they ever got lucky breaks or had help along their rise to greatness.
I believe the bootstrap crowd doesnt believe it's impossible. Hardwork, yes. My cousin was a single mom with 5 kids, her husband died young. All her kids have degrees like pharmacy or dental degrees. She herself never got any education besides high school. She never knew her dad either, her mom divorced her dad very early on, like when she was 1 year old. Her mom has always been a single mom with more than 10 kids.
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Old 08-16-2017, 01:06 PM
 
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Quote:
Originally Posted by NewbieHere View Post
The bootstrap crowd never believe it's impossible. Hardwork, yes. My cousin was a single mom with 5 kids, her husband died young. All her kids have degrees like pharmacy or dental degrees. She herself never got any education besides high school. She never knew her dad either, her mom divorced her dad very early on, like when she was 1 year old.
1 datapoint among millions. And an extreme outlier at that.

No one is saying it's impossible.
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Old 08-16-2017, 01:06 PM
 
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Quote:
Originally Posted by Thatsright19 View Post
1 datapoint among millions.
I can cite more, but of course, the I'm the victim crowd refuse to believe.
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Old 08-16-2017, 01:31 PM
 
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Quote:
Originally Posted by NewbieHere View Post
I can cite more, but of course, the I'm the victim crowd refuse to believe.
Surely for every person in the crowd of victims, there's a equal number of people who erroneously think their hard work was the only factor in their success. "Born on third base and go through life thinking you hit a triple".

The truth lies in the middle.

Last edited by Thatsright19; 08-16-2017 at 01:42 PM..
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Old 08-16-2017, 02:08 PM
 
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Quote:
Originally Posted by NYCresident2014 View Post
I also live in a high COL area and I can't believe that people aren't factoring in the deduction in their real estate purchase. I am looking at homes where the interest+prop tax deduction is genuinely worth almost $1,000 per month. That's a free Maserati... or more realistically, it means that my budget can allow me to buy a considerably more expensive house.

If I have $5,500 per month to commit to a monthly payment, but the government gives me $1,000, I can effectively afford $6,500 per month. Around here, that's a whole other class of home.

Of course I am a reasonably prudent person, so I've decided to keep my budget at $5,500 per month but to use the $1,000 in other pursuits, but it will definitely weigh in on my purchase. It also weighs in on my decision of renting vs. buying- my rent right now is $5,500 per month but none of it is deductible; if I were to buy the home I'm renting and structure the transaction so that my mortgage payment were $5,500 per month, I would effectively be paying only around $4,500 per month.

I can't stand the mortgage interest/prop tax deduction. There is no reason that the government should be distorting my rent vs. buy calculation by such a large degree. I am certain that home prices will drop once the deduction is removed as most buyers will have to drop down a level in price range.
Yeah, I'm not in the same league as you! I have a small town house in a development community in the best school District in the region. Other other communities within the same school district have better schools and more expensive housing. My area is kind of the middle for the school district. In any case the single-family homes in the same community easily sell for $800,000+.

My house is currently assessed at $490,000. I bought it five years ago for 390,000. My mortgage is $232,000. I looked at my taxes from last year and I'm paying just under $12,000 in interest a year. I make 82,000 a year so 82,000 -$12,000 equals me being in the same 25% tax bracket. It saves me money, but nothing earth shattering. If I paid twice as much in interest and got $24,000 deduction each year it's still only puts me in a 25% tax bracket. And while I would save even more money off my taxes because my taxable income is now $58,000 ( i'm assuming no other deductions for simplicity sake) I'll be paying a whole lot more interest that it's not worth it. It's like what was said earlier I'll be spending four dollars to save one dollar.

So I just don't see where it's a big decision. I was more interested in making sure my commute to work was tolerable and then I lived in a good school district because it helps preserve the value of my property when I go to sell it later. I was also very interested in a house that was maintained well and would be economical to maintain. The idea of buying a more expensive house paying more in interest to save $4000 in taxes versus $3000 in taxes didn't really cross my mind.

I have to ask though, if paying more interest is better because it saves you more money why don't more people get an interest only mortgages? Or why do people try to get the lowest interest-rate they can even refinancing to get a lower interest-rate?

Last edited by BellaLind; 08-16-2017 at 02:16 PM..
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Old 08-16-2017, 05:27 PM
 
7,135 posts, read 3,716,003 times
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Quote:
Originally Posted by CGab View Post
We lived in Chicago, one of the highest COL areas in the country and no one I knew bought a home solely based on getting a home mortgage interest deduction!
Key word there being "solely". You could say the same thing about any other reason. People weigh lots of factors in making big decisions and the mortgage interest deduction is one factor. Would it tip the balance for most people? I doubt it but it might for a few.
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Old 08-16-2017, 06:58 PM
 
17,633 posts, read 12,229,563 times
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Quote:
Originally Posted by BellaLind View Post
Yeah, I'm not in the same league as you! I have a small town house in a development community in the best school District in the region. Other other communities within the same school district have better schools and more expensive housing. My area is kind of the middle for the school district. In any case the single-family homes in the same community easily sell for $800,000+.

My house is currently assessed at $490,000. I bought it five years ago for 390,000. My mortgage is $232,000. I looked at my taxes from last year and I'm paying just under $12,000 in interest a year. I make 82,000 a year so 82,000 -$12,000 equals me being in the same 25% tax bracket. It saves me money, but nothing earth shattering. If I paid twice as much in interest and got $24,000 deduction each year it's still only puts me in a 25% tax bracket. And while I would save even more money off my taxes because my taxable income is now $58,000 ( i'm assuming no other deductions for simplicity sake) I'll be paying a whole lot more interest that it's not worth it. It's like what was said earlier I'll be spending four dollars to save one dollar.

So I just don't see where it's a big decision. I was more interested in making sure my commute to work was tolerable and then I lived in a good school district because it helps preserve the value of my property when I go to sell it later. I was also very interested in a house that was maintained well and would be economical to maintain. The idea of buying a more expensive house paying more in interest to save $4000 in taxes versus $3000 in taxes didn't really cross my mind.

I have to ask though, if paying more interest is better because it saves you more money why don't more people get an interest only mortgages? Or why do people try to get the lowest interest-rate they can even refinancing to get a lower interest-rate?

Your calculation of 82-12 is off, you are afforded the standard deduction no matter what your actual expenses are so you are likely overvaluing the benefit here
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Old 08-16-2017, 07:34 PM
 
1,912 posts, read 891,798 times
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Quote:
Originally Posted by Lowexpectations View Post
Your calculation of 82-12 is off, you are afforded the standard deduction no matter what your actual expenses are so you are likely overvaluing the benefit here
You're right of course. I was just tossing out the number for simplicity's sake to show that deducting my mortgage interest really doesn't affect my taxes that much. My total deductions were about $19,000. And I'm still in the 25% tax bracket. My point is it makes no sense to me to pay a whole bunch more in mortgage interest so I can pay less in taxes. I would end up paying tens and thousands in interest in saving a fraction of that in taxes. Again spending four dollars to save one dollar.

I would have to think that the people that fall into the realm where it's advantageous for them to pay a whole lot and mortgage interest isn't your typical person looking to buy a home. Things such as school district, low crime, the total mortgage payment, commute, etc. are what most people I know look for in a home. They don't look to buy the home with a high price and greatest amount of interest so they can save on the taxes like another poster implied... it's a nice bonus, but who goes in the homebuying hoping to pay as much interest as possible. Most people seem to try to get a home in a good location for a good price and a low interest-rate. Calculating what you would save on your federal income tax doesn't seem to apply. Especially considering most people typically are looking for a house at a certain price range/ budget. That was the point I was trying to make.
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Old 08-16-2017, 09:02 PM
 
8,655 posts, read 2,406,950 times
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Many of these deductions are very much dated. For example, the "build out" of the nation may have been helped by certain deductions regarding Real Estate, Farming and the like....but now that we sit in traffic and waste billions in gas and time, the equation(s) have changed.

Heck, Reagan gave a big speech about closing loopholes...and he actually did close some. But many of those policies were reversed by the GOP in the years since.

I am definitely in favor of removing most deductions. It's a game I have constantly refused to play. At many times in my life (including today) I could take advantage of many (for example, taking a mortgage out on house #1 and #2 and deducting the interest)....but I to play the game.

Heck, I'm even in favor of tightening up what can be called "expenses". As things stand now, you can get gold plated toilets in your HQ or private jet and deduct them. If people want to live "the life", there is no need for the honest hardworking taxpaying worker to subsidize them.
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