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For a person who is completely destitute or ruined by their housing experience, what difference
does it make if the forgiven principle is taxable or not? They aren't going to pay anything.
For the strategic defaulter, they get to pay the tax.
Yeah, anyone who knows anything about taxes knows that. So what?
I imagine that you realize that a flower shop gets to deduct the cost of pots when they sell them, right? I imagine that you realize that a donut shop gets to deduct the cost of natural gas used to cook the donuts, right? Why don't you imagine that any business owner who borrows money to run a business gets to deduct the interest?
Business interest expense is an expense that is related to earning an income. It's the same as deducting the cost of goods or wages or equipment.
The HMID bears no relationship to interest deductions in the pursuit of income.
Yeah, I do. Apparently you do, too. Others don't appear to. So you are in favor of loopholes for business to avoid taxes while you favor eliminating a similar loophole for homeowners?
Anyone that buys a house with an eye towards the HMID probably should continue renting. For the rest of us it's one of the very small benefits. I notice (or I missed it) that no one is advocating eliminating the local property tax deduction.
Yeah, I do. Apparently you do, too. Others don't appear to. So you are in favor of loopholes for business to avoid taxes while you favor eliminating a similar loophole for homeowners?
I don't think loophole means what you think it means.
I don't think loophole means what you think it means.
It doesn't, just using terminology I've noticed. Using set tax regulations, whether it's a deduction for interest paid, or for local property taxes isn't a loophole but accepted, legal, deductions.
Right now would be the worst possible time to do something like this, with the housing market struggling badly to recover still. If they were to do it someday it would need to be phased out very slowly. Obviously the only people in favor of just doing away with it all at once don't own a home. I wouldn't be as concerned with losing the deduction as I would be with home prices plummeting. Again
So you are in favor of loopholes for business to avoid taxes
while you favor eliminating a similar loophole for homeowners?
A cost of doing business is not a tax loophole. It is a legitimate business expense.
Business tax loopholes are deductions that other people or businesses cannot take advantage of because they are not the favored group.
Personal tax loopholes are pretty much the same. Deductions for charitable giving is another example.
Also, it is not necessary to quote my entire friggin' post if you are
only responding to the point that I directed at correcting your error.
You bolded my point about the flower pots and the natural gas yet,
amazingly, you completely missed the comparison with interest expenses.
Interest expenses deducted to buy a house are not for the purpose of making a living.
They are only for subsidising the real estate industry and to allow people to buy houses
that they otherwise could not afford ( similar to an automobile lease, but I digress .... ).
A cost of doing business is not a tax loophole. It is a legitimate business expense.
Business tax loopholes are deductions that other people or businesses cannot take advantage of because they are not the favored group.
Personal tax loopholes are pretty much the same. Deductions for charitable giving is another example.
Also, it is not necessary to quote my entire friggin' post if you are
only responding to the point that I directed at correcting your error.
You bolded my point about the flower pots and the natural gas yet,
amazingly, you completely missed the comparison with interest expenses.
Interest expenses deducted to buy a house are not for the purpose of making a living.
They are only for subsidising the real estate industry and to allow people to buy houses
that they otherwise could not afford ( similar to an automobile lease, but I digress .... ).
I didn't miss your point, likely understand it way more than you do. You, however, are missing mine.
Here's the point:
Advocating eliminating the HMID is as ludicrous as advocating eliminating business operations deductions. And, while you may not know it, many people who frequent these forums have done just that, or seemed shocked that businesses can deduct things like wages.
There are limits on the HMID now for the upper end, especially on 2nd homes. Even eliminating that would send shock waves through the housing industry. Eliminating it totally, even in stages, would cripple the economy and would take decades to recover.
England was used as an example earlier. I would argue that even England is not a straight line comparison. People can claim all they want to that US home ownership is a new phenomenon and they would be wrong.
From the very first settlers the urge to own property was there. Poor people from England came here as indentured servants and as soon as their indenture was finished they became freeholders. George Washington was the largest landholder in the colonies, and later in the US, at one time. The expansion west after the Revolution was all about land as was the Homestead Act and the later immigration of Scandanavians to the Upper MidWest. What were they promised? Cheap, or in some cases, free land. Something they couldn't get in their home countries.
My ancestors came here from Northern Ireland in the 1740's, and from Bavaria in the 1850's, for land.
The mortgage and forgiveness act must continue. Its the only way to deal with this tax problem, its not giving away anything.
When your lender agrees to a short sale, there is no tax on the difference between the selling price and the amount you owe. When your lender forecloses, there is no tax on the canceled debt.
Lets say the act ends, you bought a house for $250,000, you loose your job, bank forecloses and then sells the house for $200,000 that $50,000 will be considered income. If your combined federal and state marginal tax rate is 36%, you would owe $18,000 in taxes.
If you have someone who lost their job and eventually loosing their home to foreclosure, there is no money or assets to get from them. Food stamp use keeps going up and up, and up. Think these people loosing their homes and getting food stamps are going to able to pay the IRS $18,000? On money they never received? In their lifetime? No.
This act was just common sense.
Sure there are some people taking advantage of this, and can pay, but they are the small minority.
There are many ways to exclude that income and the vast majority would not be paying any tax even without the mortgage forgiveness act. Most doing a short sale or being foreclosed on will be able to use the insolvency exclusion. There are other ways to cancel out the phantom income of a short sale or foreclosure, the debt forgiveness act just makes it easier for some and made the politicians look like they were trying to help.
Sorry, but as much as some are rubbing their hands with glee the deduction may go away (kind of like that macabre attitude some have telling a pregnant woman about the things that can go wrong in delivery), I seriously doubt we will see such a deduction eliminated (unless there's a complete flat tax revamp), at least as long as the housing market is precariously teetering.
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