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Old 10-08-2011, 07:24 PM
 
33,031 posts, read 23,958,761 times
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Quote:
Originally Posted by mathjak107 View Post
you have a distorted view as to the deduction.

spending 4 dollars over the price of the house to get back one isnt a bonus its an expense. having a mortgage and getting back one of those interest dollars makes you poorer not better off.

make any investment in anything with borrowed money and its no different, you can rent and borrow money to invest and write the interest off. its not only something a homeowner gets.

ask yourself this:

if instead of buying a home you decide to rent and to buy an investment property via a mortgage instead and if that property generated more in income than your paying in rent are you at a diadvantage to the homeowner financially? of course not in fact you are ahead. dont you still have the same write offs of interest and taxes ? of course you do

what if instead of buying a rental property you bought other assets instead which generated even more of an income .? what if you borrowed money to do it just like the homeowner. are you at a disadvantage to the homeowner? no your not.. you still write off expenses and interest just the same.


interest paid for appreciating assets gets a write off, homeowner or renter you dont get a deduction for your immeadiate cost of housing namely rent or the purchase price of the house.

Okay, is there any way I can make money with this knowledge?
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Old 10-08-2011, 09:12 PM
 
85,277 posts, read 82,783,289 times
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Quote:
Originally Posted by freemkt View Post


Oh. My. God.

The median net worth of renters is something in the neighborhood of $2,000 to $4,000. What kind of a loan and interest rate is THAT going to get you.
who's fault is that? renters are renters for many reasons . some are very well to do . both the building we live in and the building we own as rentals are filled with renters who are quite comfortable.

income has nothing to do with whether you rent or own. the owning comes from developing the income or having money first.
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Old 10-08-2011, 09:13 PM
 
85,277 posts, read 82,783,289 times
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Quote:
Originally Posted by freemkt View Post
Okay, is there any way I can make money with this knowledge?
im not clear on what it is your asking??????????????????????????
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Old 10-09-2011, 03:18 AM
 
85,277 posts, read 82,783,289 times
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Quote:
Originally Posted by freemkt View Post


Oh. My. God.

The median net worth of renters is something in the neighborhood of $2,000 to $4,000. What kind of a loan and interest rate is THAT going to get you.
it will get you the same loan someone who buys a house and blows all their money on the down payment and taxes and mortgage interest and has no equity.

no assets in either case are the same result.

NO LOAN.
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Old 10-09-2011, 02:01 PM
 
Location: Ohio
22,798 posts, read 15,923,106 times
Reputation: 19273
Quote:
Originally Posted by ragnarkar View Post
Homeowners pay property taxes in addition to income taxes. Some might argue that homeowners are subsidizing renters but I don't have any numbers that either support or refute that..
Homeowners are not subsidizing renters, but renters are subsidizing homeowners.

Quote:
Originally Posted by RememberMee View Post
Simple question. Why one can deduct mortgage interest from their taxes and why I can't deduct my rent?
You can't deduct your rent for the same reason the homeowner cannot deduct their mortgage.

Quote:
Originally Posted by RememberMee View Post
Who made this decision and when? Why?
That would be Congress, specifically the House, who write the IRS tax code (in theory -- in reality, the IRS writes the tax code and the House rubber stamps it).

Quote:
Originally Posted by RememberMee View Post
Is there any basis in Adam Smith, Karl Marx, Keynes, Bible... for this housing discrimination?
Technically, rent is an expense, so in theory it should be tax deductible, however that theory generally applies to business and not individuals.

It is not discrimination. Discrimination would be allowing an homeownder to deduct their mortgage, or their mortgage and the interest on the mortgage.

I suppose you could get a 30-year loan from the bank and sign a 30-year lease and deduct the interest on the 30-year loan, but that would be stupid and self-defeating.

Quote:
Originally Posted by RememberMee View Post
Why the ones who pay for their house with cash are also penalized by the government? They don't work for their house as hard as the mortgage paying crowd?
I can't disagree there. As I have said before, I believe the mortgage interest deduction should be tied to the down-payment.

Those who put down less than 20% should not be allowed to take the deduction and those who make a down-payment of 20%-24% should only be able to deduct 10% of the interest.

Those who make a down-payment of 50% or more should be able to deduct 100%.

Quote:
Originally Posted by RememberMee View Post
Naturally, the larger your mortgage the more deductions you have.
That isn't necessarily true. It would depend on the interest rate.

Quote:
Originally Posted by jackmccullough View Post
Renters pay property taxes. Who did you think pays the property taxes, the landlord?

In many, if not most, states there is a mechanism for tenants to deduct the portion of rent paid as property taxes for their state income tax filing.

Homeowners get to deduct their property taxes and the interest on their mortgage. They don't get to deduct the amount they pay towards the principle of their mortgage.
That's quite true.

Quote:
Originally Posted by jackmccullough View Post
Why is this? It's a subsidy for homeownership. The ostensible reason is to encourage homeownership, which encourages stable communities, but based on a comparison of homeownership rates in the United States with those in Canada, which doesn't provide a mortgage interest deduction, there is no particular reason to think that the mortgage interest deduction is either necessary or helpful to increase homeownership. Nevertheless, it is so entrenched, and so many major financial decisions have been made on the basis of the deduction that it's hard to imagine that it will be ended. Reduced or capped, maybe, but not eliminated.
I wouldn't disagree, but I would mention that there is a misconception of the lack of stability in rental communities. The truth of the matter is that rental communities were stable prior to the advent of the Interstate Highway System, and the rise of the auto as part of American culture.

Most Americans couldn't afford cars, and even the ones who did, didn't drive them on a daily basis. Once cars became affordable, and once there was a well-defined system of US Routes and Interstates, that allowed people to do something they weren't able to do before, and that was commute to work.

So, business and industry are located in the urban core, because that is where the labor is and that is where the transportation logistics are. Once people can afford cars, and there is an highway system, and then homes also become affordable, Americans leave the urban core to move to the suburbs. That drives down the price of rents, which encourages lower classes of people to move into the urban core and that's where we are today.

With the decline of the railroad and the increase in autos and highways, business and industry then relocate to the interstate hubs and on the "belt-ways" and "spurs" (like I-275, I-475, I-675 etc) for logistical reasons, but not to be near labor, since labor can commute.

There's an expansion post-WW I beyond the urban core, then again post-WW II and then the big suburban expansion in the the late 1950s (the original suburbia) and then at that point the government starts taking actions to encourage home-ownership.

Some ares are definitely transient. Areas near universities for sure. Around here, leases are tailored to the school year, so you can get a 9 month lease or a 3 month lease.

The other transient areas are Section 8 Housing areas and those landlords who catered to Section 8 Housing. Here, we had like Hart Rentals who catered to Section 8 while it was profitable. Once the Republicans changed the laws, Section 8 wasn't profitable any more. No more free $5,000 grants every 2-years and no more goof-ball Democrat formulas that allow landlords to charge $1,400 rent for an apartment that has a market rental value of $275.

Quote:
Originally Posted by msdmoney View Post
It's really just a historical leftover. All personal interest used to be deductible, including credit card interest, but that was changed in 86. The deductions were eliminated, except for mortgage interest because the thought was that it would promote home ownership.
There were changes in the early 60s when JFK dropped the high tax bracket from 91% to 70%.

At one point, you could deduct all taxes paid, including sales taxes, the State and federal excise tax on gasoline and tires, and a number of other taxes.

Quote:
Originally Posted by msdmoney View Post
II've posted this before, but I fundamentally disagree with the interest deduction. It incentivizes people to keep debt and not pay off their home.
I never thought of that, but it would, by encouraging homeowners to use their equity to get 2nd and 3rd mortgages.

About 4-5 years ago, when this housing mess first started, there was a guy from Fannie Mae on CSPAN talking about how more than 2/3 of all defaults were on 2nd and 3rd mortgages, not the original/primary mortgage.

Quote:
Originally Posted by msdmoney View Post
It disproportionately favors homeowners over renters. It's also another factor pushing up and inflating home prices, while median wages have not increased over the last decade.
Yes, indeed, that and Interest Inflation (low interest rates) are the primary causes of housing values being way over-inflated.

Quote:
Originally Posted by msdmoney View Post
Renting is a perfectly viable option for many people.
One of the questions I continually asked was, "Where is all this headed?"

Home-building is very limited. You can't build homes at that rate and not run out of people to buy them.

There are people who have no desire to own a home for any number of legitimate reasons, plus people who cannot home a home because of physical or mental disabilities, or physical impediments, and then there are those who are simply financially immature and irresponsible and could never own a home.

In my case, you couldn't give me a home for free. I would refuse it because I cannot afford the property taxes, cannot afford the maintenance and have no inclination to waste my time in general upkeep, plus I don't have a car, so transportation would be an issue.

Quote:
Originally Posted by msdmoney View Post
But that goes for everything in the tax code, I don't think the government should use taxes as a means to encourage or discourage certain economic sectors, behaviors, etc"
Unfortunately for everyone, the government at all levels are very much into "social engineering."

Quote:
Originally Posted by RememberMee View Post
Me buying a home will not make things right. Second, if I'll buy a house, it will be a cash only deal. All I want "an equal protection" under handout laws.
But you have equal protection. The mortgage is not deductible in the same way that your rent is not deductible.

Quote:
Originally Posted by manderly6 View Post
And if the unit is vacant who pays it?
The landlord. That is the cost of doing business. Generally the landlord will factor that into the rent charged. In cases where the landlord owns the property outright, and that should be the case after 5 years, and most certainly before 15 years, the rents are mostly profit.

Quote:
Originally Posted by jifwittle View Post
Maybe I should be asking why nobody comes to fix my house, or clean my carpets, or maintain my landscaping for free at my house.
Renters pay for that. It is included in the price of the rent.

Quote:
Originally Posted by markg91359 View Post
Whenever someone complains about the mortgage interest deduction, the first question I always have for them is what has your experience been as a renter and with rental property? My experiences were very illuminating. In short, what I generally saw was a pattern where renters typically felt no incentive to put anything into their property at all. There is a great percentage of rental property in the USA that is badly neglected. It didn't start that way. It largely ended up that way because of ordinary "wear and tear" that neither landlords, nor tenants felt a compulsion to fix. I'm referring to broken windows that get taped rather than replaced. I'm referring to light fixtures in which no one bothers to replace bulbs. I'm referring to peeling paint on walls that no one paints over. Sometimes furnaces don't get fixed leading to dangerous situations that can involve carbon monoxide poisoning or accidents.
That burden falls on the landlord. I've never lived in such an apartment. I never really cared how the building exterior looked, but I did care about the interior, and I insist on well-maintained floors (I do not rent apartments with carpet) and fixtures, new paint and general cleanliness.

What you're describing is a classic low income area. The landlords do not bother to make repairs or maintain the premises because it is too costly. The tenants destroy everything and what isn't destroyed is stolen during a "midnight move" (and today that includes ripping out all of the copper plumbing and wiring).

The landlords are unable to recoup their costs. The best they can do is withhold the rental deposit, which probably won't cover the damages or losses.

The landlord can certainly take legal action, but that is usually pointless and costs the landlord even more money. Getting a judgment in court is easy. Collecting on the judgment is another matter altogether. You can garnishee their wages, if they happen to be working, and if you happen to know where they are working, and you would only know where they are working if you can happen to locate them and serve them with a subpoena to reveal where they are working or hire a private investigator to locate them and it will cost even more money.

There are many areas where renters take pride, and you can see that by that type of furniture that is sitting on the balcony and the trappings and decorations hanging off the windows and balconies.

Quote:
Originally Posted by markg91359 View Post
Property that is owned is not always better cared for than rental property. However, the pattern I've observed over my fifty year life is that it is generally much better cared for. That simple reason can be characterized in one sentence. Its called "pride of ownership".
If you have to bribe people through a tax deduction to maintain pride, then I think that society is one that has already failed.

Quote:
Originally Posted by hoffdano View Post
Most of these deductions are variations of behavior modification via taxation. It is offensive and distorts the true cost of goods and services.

The mortgage interest deduction should be eliminated over ten years. There is enough builtin human nature desire to own a home that no one needs incentive to do it. A ten year period should be long enough for homeowners to adjust to new taxation.
There you go. The goal should be to have to the most responsible homeowners, not the least responsible. It does little good to have people in homes who can barely afford the mortgage payment, much less spending the money to maintain the property properly.

Quote:
Originally Posted by hoffdano View Post
Federal deductions for state taxes, whether property or income or sales, are an attempt to equalize costs across states. That's offensive too. Why should someone living in a high tax state pay less in federal taxes? It encourages states to tax their citizens more than they should.
Yes it most certainly is. If those people are too stupid to elect competent legislators at the city, county and State level, then that is their problem, not mine. They need to deal with it, not slough it off on me and every one else.

Quote:
Originally Posted by freemkt View Post
Renters typically have no incentive to put anything into their property at all because the law and the landlord-tenant relationship provide disincentives. Leasehold improvements made by a tenant belong to the landlord, so the benefit such improvements provide to the renter last only as long as does his tenancy.
I own two apartments. One in Arad, Romania and one Kosice, Slovakia. I used to own a flat in Queens Park (London) but I sold it because I don't get to the UK that often and didn't have anyone to manage it for me. That's right, in Europe you can buy your apartment, rather just lease the apartment. The police chief in my ancestral villages looks after the one Kosice. Both of his daughters lived there while they went to university and now his son lives there. I only charge $30/month. I paid $75/month when I rented it just before I bought it (it's 2-bedrooms).

Quote:
Originally Posted by freemkt View Post
I've heard the National Association of Realtors claim that home sales generate lots and lots of jobs, as homeowners put lots and lots of money into their homes.
That is not entirely true. They only have money so long as there is credit-a-plenty.

A lot of people drink Doctor Ron Paul's Kool-Aid and think you should get rid of the central bank and back on the gold standard. Won't be too many homeowners or jobs generated if that happens.
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Old 10-09-2011, 02:53 PM
 
Location: NJ
18,668 posts, read 18,073,893 times
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Interest expense should not be tax deductable, for any reason. The fact it is subsidizes the lenders, by allowing for a wider spread b/w their cost of money and their charge for money.
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Old 10-09-2011, 03:15 PM
 
85,277 posts, read 82,783,289 times
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its part of the cost basis of an investment .... if they are going to tax you on the gains of money i make on margin its only fair they tax you on your actual profits less expenses.
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Old 10-10-2011, 01:34 PM
 
Location: Quincy, MA
385 posts, read 1,340,971 times
Reputation: 187
In Massachusetts you CAN deduct rent on your income taxes. Only up to $3000, though.
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