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Okay, I'm not a single issue voter...but if they take away the mortgage interest deduction I will be
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Anonymous
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Did anyone hear about this? Obama wants the mortgage interest deduction to be removed on mortgages over $500K? I don't deny I am high income -- $200K a year. But I'm already paying about $65K a year in taxes, and that's WITH the mortgage interest deduction. If I lose that, I'll be paying another $10K in taxes. I am well aware I could move into a cheaper house or move to the suburbs, but as a single mom (granted a well paid single mom) with two kids in private school (one with special needs), it's important for me to be close to my kids' schools, and I feel like I am making all the right decisions for my kids.
Anyway, I'm rambling. I need the mortgage interest deduction, and I imagine everyone else does too in a high real estate prices city like DC. |
jsteele
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It's not Obama who made this suggestion. It's a "bipartisan" commission co-chaired by a far-right Republican and a center-right Democrat. Obama is proposing an income tax cut from which you would benefit. The Republicans are opposing his plan.
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Anonymous
| Why does this bother you, but not Erkels proposal to raise taxes on incomes over $250k? It will have the same effect. |
Anonymous
| I think they would have to phase it in. Grandfather in those of us with the deduction but then slooowwlly phase it in over time. Talk about a plan that would send a bunch more people into default. However, if you already pay the ATM I don't think you are getting the benefit of the deduction, anyway. If anyone knows differently, please tell. |
Anonymous
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OP here. I guess I am looking at my very specific circumstance of my mortgage. Is the proposal to take away the mortgage interest deduction for the portion of the mortgage above $500K or for the ENTIRE mortgage?
If Obama didn't propose it, I assume he'll be willing to veto it? Has he said something about this? I am a lifelong democrat who voted for Obama. I guess I don't mind higher tax rates because I don't see that as resulting in $10K more in taxes a year for me (but maybe a little bit more). This tax break has such big implications for me personally (and as I said, I think for many people in DC). |
jsteele
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Because she only makes $200 per year. That proposed increase wouldn't affect her. |
Anonymous
That's not actually true (in spirit). I wouldn't mind a higher tax rate for myself, but when you are talking about $10K more in taxes, my tax rate would need to go up by 5%, and under a graduated tax increase, I am sure my income tax rate would not go up that much. I am obviously concerned with my own selfish needs. I don't mind paying more in taxes, but not $10K more! |
Anonymous
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I think that there is one compelling reason for it, namely that the mortgage interest deduction is a handout, and not one that goes to needy individuals.
But a compelling reason for keeping it is that revoking it changes the financial terms of existing home buyers. They entered into the transaction expecting the deduction. If the government reverses itself, that will undermine the economics behind their home purchase. It's like taking out a 30 year fixed rate loan and then having the bank jack the rate up. What's more, even if they grandfather it, it will affect the price of future home sales. The interest deduction is built into the market price of homes. So when you sell your home in the future, the market of potential buyers will not have that interest deduction and therefore must lower their offer price. In the long run, that's fine. But again it means that people made a purchase decision based on their belief in the market value of a home, and this is undermined by the government action. It's fine if prices change due to the economy, but a government policy change is an unnatural distortion, even if it is to move closer to the intrinsic value of homes. FWIW I rented for years, recently bought, but my mortgage isn't all that big so the impact to me personally isn't devastating. |
Anonymous
| This is a great example of why centralized goverment and the morons who run it create such mayhem. Giving the deduction increases home prices. Then the local goverments make more on real estate taxes and lawyers mkae higher settlement fees. You take it away and the Federal Goverment makes more initially but when home prices fall again they are on the hook for insuring all the forclosures, and state and local goverments get cut back. Goverment meddling always distorts reality. Nobody really knows what the actual value of real propery is if the goverment didn't insure mortgages and allow interest write-offs and now we have a melt-down that is predominantly real property based. |
Anonymous
| Not to mention the current QE policy to maintain artificial interest rates for the purpose of keeping real estate prices up. |
Anonymous
| sorry goverNment; I type too fast. |
Anonymous
Not to be picky, but you seemed to have typed too fast about 4 times in that post... No shame in plain on misspelling. |
Anonymous
Plain ol' misspelling. (see, now that was a typo) |
Anonymous
And at this point it's only a proposal being floated by the two co-chairs. Which is not to say we should not discuss it now, while the is still plenty of room for corrections. According to http://modeledbehavior.com/2010/11/11/simpson-bowles-should-the-mortgage-interest-deduction-be-eliminated/, "They present two possible plans for this deduction. One abolishes it entirely, and the other one eliminates it for second homes, home equity mortgages, and any mortgages over $500,000 in value." |
Anonymous
So the person with a $499K mortgage will have a nice $24K deduction per year while the person with the $501 mortgage will not have anything? Is that reasonable? |