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The reason behind giving home owners a tax deduction is to help stimulate the economy. New homes put people to work, from carpenters, plumbers, masons, electricians, etc. How many jobs do renters create? None.
This is probably the most frequently raised reason for keeping the mortgage interest deduction in place. The construction trades are a backbone of the middle and even upper-middle classes, and anything that undercuts new home sales will impact seriously on employment in those. Many of these folks are having rather lean times just from the credit crunch. If that's not cleared up by Spring, there may be serious issues there.
Quote:
Originally Posted by Glitch
Obtaining a loan simply for the purpose of getting a tax deduction is rather silly, since you still have to pay back the loan and the interest. The few thousand dollars you get to reduce your taxable income by is hardly compensation for the interest you have to pay back on the loan.
That's all true, but if the effective rate of borrowing falls below the effective rate of return on investing, you've got free money coming in. Free money is the best kind. Hence, it can at times be sensible to borrow just because the interest on the loan is tax-deductible...
You answered your own question. The mortgage tax deduction IS the incentive to buy.
No, because homes do not always increase in value. Currently there are numerous homes that are assessed at a lower value than what an owner purchased them for just a few years ago. If those home owners were to sell their homes now, they would be taking a loss.
Mortgage payments are also not always consistent. It depends on the type of loan you obtained. If, for example, you obtained a variable rate loan to purchase a home in 2005, not only are your payments going to substantially increase, but the value of your home is going to go down.
The reason behind giving home owners a tax deduction is to help stimulate the economy. New homes put people to work, from carpenters, plumbers, masons, electricians, etc. How many jobs do renters create? None.
Obtaining a loan simply for the purpose of getting a tax deduction is rather silly, since you still have to pay back the loan and the interest. The few thousand dollars you get to reduce your taxable income by is hardly compensation for the interest you have to pay back on the loan.
Thank you Glitch. You are right on.
I would like to know how old PG is. How are twenty & thirty & even forty somethings going to own their home free and clear???? If we had to buy homes without mortgages the homeownership rate would probably be in the 10% range instead of 70%+ and the US would never have prospered like it has in the past 60 years.
As I have suggested elsewhere, I think we should throw out most of the existing individual tax system and replace it with an all income from all sources and deduct the first $150 grand and pay a graduated tax on the rest. That should relieve most people of a Federal tax burden and eliminate the market distortions created by things like deducting mortgage interest.
As I have suggested elsewhere, I think we should throw out most of the existing individual tax system and replace it with an all income from all sources and deduct the first $150 grand and pay a graduated tax on the rest. That should relieve most people of a Federal tax burden and eliminate the market distortions created by things like deducting mortgage interest.
While I agree fully with the intent of your statement, do you realize that you are pretty much shifting the tax burden to people who make over $150 grand a year? If the super rich see high taxation, they will flee America in droves and take their money with them. Unless you are like me, moving to Pennsylvania and converting to the Amish faith, you might see a lot of hardship if the rich leave in droves.
You answered your own question. The mortgage tax deduction IS the incentive to buy.
No, because homes do not always increase in value. Currently there are numerous homes that are assessed at a lower value than what an owner purchased them for just a few years ago. If those home owners were to sell their homes now, they would be taking a loss.
Mortgage payments are also not always consistent. It depends on the type of loan you obtained. If, for example, you obtained a variable rate loan to purchase a home in 2005, not only are your payments going to substantially increase, but the value of your home is going to go down.
The reason behind giving home owners a tax deduction is to help stimulate the economy. New homes put people to work, from carpenters, plumbers, masons, electricians, etc. How many jobs do renters create? None.
Obtaining a loan simply for the purpose of getting a tax deduction is rather silly, since you still have to pay back the loan and the interest. The few thousand dollars you get to reduce your taxable income by is hardly compensation for the interest you have to pay back on the loan.
If getting a tax writeoff is the only incentive to buy.. then we have bigger troubles.
If no one lives off of rentals.. I'll inform the guy who owns the apartment buildings down the street, those who invest in NNN leases, that that they need to get a job.
People buy vs rent because they will one day have an asset vs nothing.
Thats enough of an incentive for me. Rarely does "tax writeoffs" come into account when the average citizen begin thinking of buying a home (ok, it might allow them to actually buy a bigger house). It may come into play for the real estate investor, but the average citizen takes the tax writeoff as a bonus, not THE incentive to buy..
I would like to know how old PG is. How are twenty & thirty & even forty somethings going to own their home free and clear???? If we had to buy homes without mortgages the homeownership rate would probably be in the 10% range instead of 70%+ and the US would never have prospered like it has in the past 60 years.
I am mid 30's and my home is paid for, free and clear, along with my cadillac, which I got a car loan for. I did get a mortgage, never did I state that people shouldnt get a mortgage. Dont change what I said. I bought what I could afford, I paid it off.
This is one guy who is debt free. I did not buy a house for the tax incentives, I bought a house so I could sell it one day, pocket my "bank payments" by cashing out instead of what others would have spent in rent.
Excellent point. Actually, people used to take out home equity loans to try and change a non-deductible interest to a deductible interest. God, isn't our tax code like a patchwork quilt? I am not sure about the founding fathers, but I am sure the quilting mothers would be proud of us.
This is the funniest thing I've ever read. I think it makes bumping this thread worthwhile.
Also, I think rent needs to be deductible, at least a percentage that makes it equivalent to the mortgage interest deduction.
Almost half the people pay no income tax at all. They would not benefit, nor those whose rent plus other deductions are below the standard deduction. The number of taxpayers to benefit would not be a sizable voting bloc.
I suppose if all the montly mortgage payment was made deductable, as opposed to just the interest, something similar could be extended to rent payments. Only thing is, the appartment building owner would have to loose his mortgage interest deduction (can't have the same deduction twice), meaning his costs, and therefore rents, would go up.
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