get rid of Section 163(h)(3)?

[conjur]

Originally posted by: Rob9874

Originally posted by: conjur

Originally posted by: Rob9874

Originally posted by: conjur
The "subsidy" is not increasing demand. People don't go into buying a home thinking, "Hey! That mortgage interest deduction is just the thing we need to buy a house!" Most have no clue how much money they'll save in their next tax return when they buy a house.

Actually, I have friends who buy investment properties, and rent them out, just for the tax break. They basically get some renter to pay their mortgage, and they get the tax break. I haven't figured out if it's a real benefit or not.

Unless the home loans are huge, I don't see how they make much money via the tax breaks.

Look at it this way. Let's say you have a $1,000/mo mortgage and about $900/mo goes to interest. You can lower your taxable income by $10,800. Let's say you're married fiiling jointly and had $99,000 in taxable income before the mortgage interest deduction. Your tax liability is $18,376. With the deduction, your taxable income falls to $88,200 with a tax liability of $15,676. A whopping $2700 in savings or, about 2.7% of your former taxable income.

Considering the costs of maintaining a rental home, $2,700/yr is not a lot of money.

Do the same calculation, but single making $55k. $2700/yr is an additional $225/mo, plus someone is buying your house for you. I would say the greater benefit comes from home appreciation. My home we're building has increased $17,500 in the last 3 months, and we haven't even broke ground yet!

Right, appreciation is the biggest area of return on investment. That's sort of what I'm getting at. Mortgage interest deduction is not why people get into buying homes for themselves or for renting them out.

 

[ElFenix]

Originally posted by: conjurThe "subsidy" is not increasing demand. People don't go into buying a home thinking, "Hey! That mortgage interest deduction is just the thing we need to buy a house!" Most have no clue how much money they'll save in their next tax return when they buy a house.

As for a difference in the tax brackets vs. loopholes, tax brackets effect everyone at that level of income. Loopholes are only used by those wise (or maybe wily) enough to use them.

so now you're just saying that people aren't acting rationally? do you know of anyone that owns a house that doesn't take advantage of the deduction for mortgage interest (assuming they itemize)? at least the brackets are rational with respect to income tax norms and the normal redistributive external policy. the deduction effectively flattens the brackets.

 

[Rob9874]

Hey, I just want it to get back to the 70's or 80's, when ALL interest was tax deductable. Do you know how much of my paycheck goes to interest alone? I can't wait to get my house, so I can get a home equity loan, consolidate all my high-interest debt, and deduct the interest.

 

[conjur]

Originally posted by: ElFenix

Originally posted by: conjurThe "subsidy" is not increasing demand. People don't go into buying a home thinking, "Hey! That mortgage interest deduction is just the thing we need to buy a house!" Most have no clue how much money they'll save in their next tax return when they buy a house.

As for a difference in the tax brackets vs. loopholes, tax brackets effect everyone at that level of income. Loopholes are only used by those wise (or maybe wily) enough to use them.

so now you're just saying that people aren't acting rationally? do you know of anyone that owns a house that doesn't take advantage of the deduction for mortgage interest (assuming they itemize)? at least the brackets are rational with respect to income tax norms and the normal redistributive external policy. the deduction effectively flattens the brackets.

WTF? How am I saying people aren't acting rationally? Damn, EF. You're becoming worse than CsG at twisting peoples' words.