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Old 10-05-2011, 01:40 PM
 
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Simple question. Why one can deduct mortgage interest from their taxes and why I can't deduct my rent? Who made this decision and when? Why? Is there any basis in Adam Smith, Karl Marx, Keynes, Bible... for this housing discrimination? 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?

Naturally, the larger your mortgage the more deductions you have. I'm guessing that lion's share of mortgage deductions is claimed by very financially blessed individuals who could very well survive without this government handout for the rich home owners & bankers. Actually, many of them could pay for their homes upfront with cash if not for "government incentives". If there is a "breaking point" above which it is financially advantageous to take a loan out for purchase rather than to pay with cash, there is something rotten in Denmark. The idea is to cut interest on mortgage to minimum (using tax breaks) and to invest $ at market rates elsewhere, all the budget deficits be damned. Obviously, low wage mortgage payers don't "squeeze" nearly as much $ from their tax breaks as top 10%. The question is, why renters and savers like me should subsidize gated community dwellers?

From what I know many businesses prefer to lease equipment instead of owning because of the massive tax loopholes government offers. Some companies setup fictional in the truth and real&legal as far as IRS is concerned LLCs that buy and "lease" equipment to the "mother" corporation. If this is profitable, what is the "public" benefit of it all?

Last edited by RememberMee; 10-05-2011 at 01:58 PM..
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Old 10-05-2011, 02:01 PM
 
Location: DFW
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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..
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Old 10-05-2011, 02:07 PM
 
Location: NJ
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if it bothers you so much then buy a house
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Old 10-05-2011, 02:09 PM
 
Location: Vermont
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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.

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.
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Old 10-05-2011, 02:10 PM
 
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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..
Property taxes are a local matter that is not affecting federal government policies. Do you want to say that if I rent a house, it's an owner not me who pays property taxes? Such remarkable altruism Home sale gains are not taxable by Federal Government. It doesn't sound right either. If federal government subsidizes your mortgage, should it have a small piece of a pie also?

Also, it's something like $10,000 per pupil per year in my school district (probably more). If a home owner with 2 children doesn't pay $20,000 in property taxes per year guess who makes up the difference?
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Old 10-05-2011, 02:12 PM
 
Location: DFW
6,867 posts, read 12,760,827 times
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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.

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.
In my 10 years of renting, I've never paid a single $ in property taxes and have never received any notice to collect property taxes from me.

Are you talking about the portion of your "rent" that includes the property taxes the owner pays?
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Old 10-05-2011, 02:15 PM
 
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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.

I've posted this before, but I fundamentally disagree with the interest deduction. It incentivizes people to keep debt and not pay off their home. 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. It's better for people to pay lower prices for homes and pay less interest, than get a small return from the government on interest payed.

My main problem with the HMID though is that I don't think the government needs to incentivize or encourage home ownership. Renting is a perfectly viable option for many people. 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" But if I were to propose eliminating the HMID over time, it should include a comparable drop in overall taxes.

I would like to see it phased out over time, so as not to punish those that used it to compute how much house they could afford.
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Old 10-05-2011, 02:19 PM
 
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Originally Posted by CaptainNJ View Post
if it bothers you so much then buy a house
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.
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Old 10-05-2011, 02:21 PM
 
Location: NJ
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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.
theoretically the rate at which you pay rent accounts for the costs of the landlord which also includes his tax benefit from the tax deduction. so you are protected if you negotiate a good rent with the landlord (or find one priced well).
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Old 10-05-2011, 02:43 PM
 
Location: South Carolina - The Palmetto State
1,147 posts, read 1,660,956 times
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Um - were you this "outraged" when GE paid ZERO corporate taxes for the year and got "incentives" back from the gov't???
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