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

[ElFenix]

why is home mortgage interest deductible? it isn't a subsistence deduction because people without money are renting (plus the deduction is available for secound houses, for interest up to $1 million of debt, and interest on up to $100,000 of second mortgage debt); the value of the subsidy rises with income since its a deduction in a progressive tax scheme (regressive form); it incentivizes people to do something they already would do (buy a house), which means that the house market is overcapitalized compared to other investments; and the subsidy goes at least in part to two groups: sellers (who can charge more for the building) and lenders (who can charge more for their money).

 

[CaptnKirk]

Because building contractors and mortgage financers make thier profit on your payments.

The are the ones that make the income - they are supposed to pay thier tax on their income.

 

[ElFenix]

Originally posted by: CaptnKirk
Because building contractors and mortgage financers make thier profit on your payments.

The are the ones that make the income - they are supposed to pay thier tax on their income.

well if you look at it that way why isn't ALL consumption tax deductible then?

 

[Gravity]

I hope it doesn't go away.......I just bought a home.

 

[Rob9874]

Originally posted by: Gravity
I hope it doesn't go away.......I just bought a home.

 

[ElFenix]

Originally posted by: Rob9874

Originally posted by: Gravity
I hope it doesn't go away.......I just bought a home.

ok, so it wouldn't be politically expedient... but what sense does it make (other than home owners voting out politicians?)

 

[conjur]

Originally posted by: ElFenix

Originally posted by: Rob9874

Originally posted by: Gravity
I hope it doesn't go away.......I just bought a home.

ok, so it wouldn't be politically expedient... but what sense does it make (other than home owners voting out politicians?)

Encourages people to partake in that "ownership society", eh?

 

[ElFenix]

Originally posted by: conjur

Originally posted by: ElFenix

Originally posted by: Rob9874

Originally posted by: Gravity
I hope it doesn't go away.......I just bought a home.

ok, so it wouldn't be politically expedient... but what sense does it make (other than home owners voting out politicians?)

Encourages people to partake in that "ownership society", eh?

people are already encouraged enough (houses are the american dream), and it is actually a detriment to the 'ownership society' because the subsidy increases costs for buyers since the money and the house cost more than otherwise. also, there is a lot more money in houses than might otherwise be, since the return on the investment is more attractive than it might be.

 

[tnitsuj]

It makes it more attractive and affordable to purchase a home.

 

[conjur]

Originally posted by: ElFenix

Originally posted by: conjur

Originally posted by: ElFenix

Originally posted by: Rob9874

Originally posted by: Gravity
I hope it doesn't go away.......I just bought a home.

ok, so it wouldn't be politically expedient... but what sense does it make (other than home owners voting out politicians?)

Encourages people to partake in that "ownership society", eh?

people are already encouraged enough (houses are the american dream), and it is actually a detriment to the 'ownership society' because the subsidy increases costs for buyers since the money and the house cost more than otherwise. also, there is a lot more money in houses than might otherwise be, since the return on the investment is more attractive than it might be.

The housing market tends to reach an equilibrium between prices and interest rate changes. Right now, interest rates are incredibly low so home prices are higher. When rates start to creep up, prices will have to drop in order for them to still be affordable to those in the market for them. Who would pay $300,000 for a home at 9% when it's now at 5.5%? If rates go up, people will find cheaper homes to match their budget.

Having the mortgage interest deductible helps make that home affordable and, imo, helps counter the added cost of hazard insurance, property taxes, water/sewage, and trash removal.

BTW, I remember when all interest on personal loans was deductible. I used to get some pretty decent refunds back then because of car loans and furniture loans.

 

[ElFenix]

Originally posted by: conjur
Having the mortgage interest deductible helps make that home affordable and, imo, helps counter the added cost of hazard insurance, property taxes, water/sewage, and trash removal.

as for affordability, at best the subsidy is neutral. at worst, it increases demand, increases the cost a seller charges, and increases the cost a lender charges.
and if we're worried about affordability, then why is it available for huge loans and second houses?

 

[Hayabusa Rider]

Originally posted by: ElFenix

Originally posted by: conjur

Originally posted by: ElFenix

Originally posted by: Rob9874

Originally posted by: Gravity
I hope it doesn't go away.......I just bought a home.

ok, so it wouldn't be politically expedient... but what sense does it make (other than home owners voting out politicians?)

Encourages people to partake in that "ownership society", eh?

people are already encouraged enough (houses are the american dream), and it is actually a detriment to the 'ownership society' because the subsidy increases costs for buyers since the money and the house cost more than otherwise. also, there is a lot more money in houses than might otherwise be, since the return on the investment is more attractive than it might be.

What happens to the foreclosure rate if this tax break is gone?

 

[ElFenix]

Originally posted by: WinstonSmith

Originally posted by: ElFenix
ok, so it wouldn't be politically expedient... but what sense does it make (other than home owners voting out politicians?)

What happens to the foreclosure rate if this tax break is gone?

 

[Hayabusa Rider]

Originally posted by: ElFenix

Originally posted by: WinstonSmith

Originally posted by: ElFenix
ok, so it wouldn't be politically expedient... but what sense does it make (other than home owners voting out politicians?)

What happens to the foreclosure rate if this tax break is gone?

Sorry EF but that is a non answer. Screw politicians. Most people I know are making large payments on homes. Removing what is a de facto source of income directly tied to their domicile would in fact cause their outgo to exceed their income. That leads to massive forclosures AND bankruptcies.

In theory you may be right, but the market has reached equilibrium. You toss it, you get a new one, however that does nothing for present OR future homebuyers since the NET price per month won't change much if at all. We live in a per month world. Net prices come about to meet that. All you do is cause economic collapse by readjusting. No gain.

 

[conjur]

Originally posted by: ElFenix

Originally posted by: conjur
Having the mortgage interest deductible helps make that home affordable and, imo, helps counter the added cost of hazard insurance, property taxes, water/sewage, and trash removal.

as for affordability, at best the subsidy is neutral. at worst, it increases demand, increases the cost a seller charges, and increases the cost a lender charges.
and if we're worried about affordability, then why is it available for huge loans and second houses?

Second, third, fourth, etc. homes are typically used for rental properties. Without the deduction, the profitability of those rental homes decreases and the rents would have to be increased. That would make renting a home unaffordable to a higher number of people.

As for huge loans, are the rich supposed to be discriminated against?

 

[ElFenix]

Originally posted by: conjur

Originally posted by: ElFenix

Originally posted by: conjur
Having the mortgage interest deductible helps make that home affordable and, imo, helps counter the added cost of hazard insurance, property taxes, water/sewage, and trash removal.

as for affordability, at best the subsidy is neutral. at worst, it increases demand, increases the cost a seller charges, and increases the cost a lender charges.
and if we're worried about affordability, then why is it available for huge loans and second houses?

Second, third, fourth, etc. homes are typically used for rental properties. Without the deduction, the profitability of those rental homes decreases and the rents would have to be increased. That would make renting a home unaffordable to a higher number of people.

As for huge loans, are the rich supposed to be discriminated against?

business expenses are deductible anyway (rental home). and again, without the subsidy the interest rate and the selling price on the house would be lower (so it would be even cheaper because rental properties wouldn't have to compete with the overconsumption of housing). rents wouldn't have to be increased.

don't you usually rail against big tax loopholes for wealthy people?

 

[ElFenix]

Originally posted by: WinstonSmith

Originally posted by: ElFenix

Originally posted by: WinstonSmith

Originally posted by: ElFenix
ok, so it wouldn't be politically expedient... but what sense does it make (other than home owners voting out politicians?)

What happens to the foreclosure rate if this tax break is gone?

Sorry EF but that is a non answer. Screw politicians. Most people I know are making large payments on homes. Removing what is a de facto source of income directly tied to their domicile would in fact cause their outgo to exceed their income. That leads to massive forclosures AND bankruptcies.

In theory you may be right, but the market has reached equilibrium. You toss it, you get a new one, however that does nothing for present OR future homebuyers since the NET price per month won't change much if at all. We live in a per month world. Net prices come about to meet that. All you do is cause economic collapse by readjusting. No gain.

duh. i want to know what sense it makes to even have it in there in the first place. there doesn't seem to be a tax-system reason. the usual extra-system reasons don't appear to apply either.

 

[conjur]

Originally posted by: ElFenix

Originally posted by: conjur

Originally posted by: ElFenix

Originally posted by: conjur
Having the mortgage interest deductible helps make that home affordable and, imo, helps counter the added cost of hazard insurance, property taxes, water/sewage, and trash removal.

as for affordability, at best the subsidy is neutral. at worst, it increases demand, increases the cost a seller charges, and increases the cost a lender charges.
and if we're worried about affordability, then why is it available for huge loans and second houses?

Second, third, fourth, etc. homes are typically used for rental properties. Without the deduction, the profitability of those rental homes decreases and the rents would have to be increased. That would make renting a home unaffordable to a higher number of people.

As for huge loans, are the rich supposed to be discriminated against?

business expenses are deductible anyway (rental home). and again, without the subsidy the interest rate and the selling price on the house would be lower (so it would be even cheaper because rental properties wouldn't have to compete with the overconsumption of housing). rents wouldn't have to be increased.

don't you usually rail against big tax loopholes for wealthy people?

I don't normally rail against tax loopholes for wealthy people. I rail against inordinately low tax brackets. I see nothing wrong with the mortgage interest deduction.

BTW, how do you determine that removing the deduction will lower interest rates and home prices?

 

[Hayabusa Rider]

Originally posted by: ElFenix

Originally posted by: WinstonSmith

Originally posted by: ElFenix

Originally posted by: WinstonSmith

Originally posted by: ElFenix
ok, so it wouldn't be politically expedient... but what sense does it make (other than home owners voting out politicians?)

What happens to the foreclosure rate if this tax break is gone?

Sorry EF but that is a non answer. Screw politicians. Most people I know are making large payments on homes. Removing what is a de facto source of income directly tied to their domicile would in fact cause their outgo to exceed their income. That leads to massive forclosures AND bankruptcies.

In theory you may be right, but the market has reached equilibrium. You toss it, you get a new one, however that does nothing for present OR future homebuyers since the NET price per month won't change much if at all. We live in a per month world. Net prices come about to meet that. All you do is cause economic collapse by readjusting. No gain.

duh. i want to know what sense it makes to even have it in there in the first place. there doesn't seem to be a tax-system reason. the usual extra-system reasons don't appear to apply either.

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

Duh, my bad. I thought you were talking about getting rid of Section 163(h) (3).

Clearly you were not

 

[ElFenix]

Originally posted by: WinstonSmith


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

Duh, my bad. I thought you were talking about getting rid of Section 163(h) (3).

Clearly you were not

just like in the tax code itself, titles do not mean anything.

 

[ElFenix]

Originally posted by: conjurI don't normally rail against tax loopholes for wealthy people. I rail against inordinately low tax brackets. I see nothing wrong with the mortgage interest deduction.

BTW, how do you determine that removing the deduction will lower interest rates and home prices?

the subsidy increases demand beyond what it would be in a neutral situation. larger demand = higher prices. basic economics.

what is the difference between inordinately low tax brackets and inordinately large loopholes?

 

[conjur]

Originally posted by: ElFenix

Originally posted by: conjurI don't normally rail against tax loopholes for wealthy people. I rail against inordinately low tax brackets. I see nothing wrong with the mortgage interest deduction.

BTW, how do you determine that removing the deduction will lower interest rates and home prices?

the subsidy increases demand beyond what it would be in a neutral situation. larger demand = higher prices. basic economics.

what is the difference between inordinately low tax brackets and inordinately large loopholes?

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.

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.

 

[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.

 

[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.

 

[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!