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Oh, the $10k SALT applies to mortgage interest, and is capped at $10k???
A $750k mortgage at a 4% coupon, 30 year fixed results in $556k in interest over the life of the loan, averaging $18.5k a year. Yet they are capping at $10k? Doing some quick math, a loan averaging $10k/yr in interest (4%, 30 yr fixed) is only a $400k loan.
Or am I thinking about this incorrectly...and the $10k cap is your tax bracket applied to the interest. I.e. say a 25% tax bracket, $10k cap allows for $40k of mortgage interest to be deducted.
No, unfortunately the interest deduction is capped at $10,000. So if you have a big mortgage on a $650,000 house, you will only receive a very partial deduction. We should be up in arms about that, but we are not, being sheep and all. Productive people don't complain, they are just quietly victimized by the histrionics of the non-productive. Who dominate politically due to their sheer mediocrity and sheer numbers.
Capping mortgage interest (for everyone) at $10k is a very big deal
So the total mortgage cap is completely a fake optic when you go ahead and calculate the interest cap. They are back-dooring an "AMT" esque tax, as people with a middle/upper middle class sized mortgage (~500k for NJ standards) will effectively have zero property tax deductions when compared to before.
Do the math -- Most ppl refi how often? Let's say you have a $500k mortgage and refi every 10 years, putting you further into the interest curve, the average interest on a $500k 30 yr mortgage, 4% rate, is $18k/yr of interest over the first 10 years. Under the proposed code you could only deduct $10k of this, with the remaining $10k on taxes.
For the current code, you could deduct all $18k/yr of mortgage interest, PLUS property tax.
Under the proposed code, youre effectively losing the equivalent of 100% of your current property tax deduction once your mortgage is around $500k. And it is a sliding scale, so even with a $300k or $400k mortgage, youre still in a worse spot than before.
No, unfortunately the interest deduction is capped at $10,000. So if you have a big mortgage on a $650,000 house, you will only receive a very partial deduction. We should be up in arms about that, but we are not, being sheep and all. Productive people don't complain, they are just quietly victimized by the histrionics of the non-productive. Who dominate politically due to their sheer mediocrity and sheer numbers.
Marc, can you link where you read it? I don't see it in the NYTimes reports from this morning.
$10K cap is on property tax deduction . No where does it mention an annual cap on interest .
People are doing math over this for no reason!
Unless there is something new that I haven’t heard about, there is no cap on interest. There is a cap on the principal though. As of this morning, they were going to lower the cap from $1M (currently) down to $750,000.
The $10,000 deduction can either be used for property taxes or state income tax.
Unless there is something new that I haven’t heard about, there is no cap on interest. There is a cap on the principal though. As of this morning, they were going to lower the cap from $1M (currently) down to $750,000.
The $10,000 deduction can either be used for property taxes or state income tax.
If that is correct, that there is no $10,000 cap on the mortgage interest deduction, and it sounds like it is, then I am even happier. I still wish it were indexed for inflation, but that is too much to hope for. All in all, the final bill seems a lot better than I initially feared. And the SALT can be used for any combination of state and local income or property taxes, it appears you don't have to pick only one.
At this point, I am prepared to repeal my title to this thread and admit that the sky will remain close to its present altitude.
If that is correct, that there is no $10,000 cap on the mortgage interest deduction, and it sounds like it is, then I am even happier. I still wish it were indexed for inflation, but that is too much to hope for. All in all, the final bill seems a lot better than I initially feared. And the SALT can be used for any combination of state and local income or property taxes, it appears you don't have to pick only one.
At this point, I am prepared to repeal my title to this thread and admit that the sky will remain close to its present altitude.
I think it is still terrible for dual income families whose SALT is way more than 10K. The income thresholds 7 brackets of the Senate bill are also much lower than the existing brackets and the House proposed brackets, leading to more income being taxed at higher brackets.
I think it is still terrible for dual income families whose SALT is way more than 10K. The income thresholds 7 brackets of the Senate bill are also much lower than the existing brackets and the House proposed brackets, leading to more income being taxed at higher brackets.
True. Well, as of this morning, the whole damned thing is increasingly doubtful. With Rubio grandstanding to make child care credits fully refundable, meaning people who pay no effing taxes get a tax credit (absurd), and with 2 other senators out sick, the whole thing could come crashing down and we might end up with no bill at all. Perhaps that would be the best thing.
Illustrating exactly what I hoped for when Trump got elected. Total obstructionism from the Democrats and constant hysteria from the Republicans. Meaning NOTHING gets done, which is exactly what we want when statism is on the rise.
Wasn't this bill supposed to simplify the tax code? This whole thing is a farce. Passing something for the sake of passing anything. Hopefully some republicans in the congress will manage to find their co.ones and kill this thing while there's still time.
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