Kill the mortgage tax deduction?
Some people argue the break distorts the housing market and unfairly helps buyers who can afford more expensive homes.
This post comes from Jim Wang at partner blog Bargaineering.
I promised you that we'd discuss Planet Money's "6 policies economists love (and politicians hate)." Let's talk about the first one: eliminating the mortgage tax deduction.
Here's how Planet Money presents the idea, part of "the common-sense, no-nonsense Planet Money economic plan -- backed by economists of all stripes, but probably toxic to any candidate that might endorse it":
Eliminate the mortgage tax deduction, which lets homeowners deduct the interest they pay on their mortgages. Gone. After all, big houses get bigger tax breaks, driving up prices for everyone. Why distort the housing market and subsidize people buying expensive houses?
I agree and here are my three reasons why.
Post continues below.
Second, how many people consider the deduction when buying a home? You probably look at your income and try to qualify for a loan. How many buyers adjust their withholding after they buy a house because they know they will claim the deduction? Very few, I suspect.
It's not part of the buying decision. Rather, the deduction results in a tax break, disbursed as a tax refund the following year. That money is then doled out to whatever the recipient's existing needs or wants are.
Third, the deduction is a government subsidy that increases home prices. Just as the Fed's quantitative easing and loose monetary policy have resulted in lower interest rates -- which increases home prices -- the mortgage deduction is fiscal policy that boosts home prices and rents.
What do you think? Time to scrap the deduction?
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Instead of scrapping all mortgage interest deductions, why not eliminate the mortgage interest deduction that is allowed for second homes, yachts, motor homes, etc. If you can afford a second home, the government probably doesn't need to subsidize this.
Also, eliminate home equity lines of credit unless made to improve the first residence. Again, many people take these out to purchase cars, pay off credit card debt, etc and why is the government subsidizing this behavior.
Keep the mortgage interest deduction on your primary residence.
I pay nearly $12,000 on mortgage interest alone, and on my rental house I pay mortgage interest. No, I hardly don't think it is time to scrap the deduction. It is bad enough to have to rent your rent because you can't sell, let alone the expense of fixing what the tenant breaks all the time. Half my pay goes toward interest on my house, and just because the sale of my first house fell through, left me with such a high interest rate. I certainly would be bankrupcy court if that were to happen, because my student loans are considered of what I report on my 1040, I only gross $32,000, and I support four people. Can you see the big picture now? My adjusted gross income would show more than I have to spend! Where did you get your degree?
STUPID IDEA...WRONG ASSUMPTIONS. Tax deduction for interest is helping middle class working hard to have some break. It promotes house bying. If i will not have a deduction for interest i pay, i will not own a house. Period. I woudl just rent. Why bother with downpayment
if it menas nothing. Rich people dont care one way or another. Thye pay cahs for house and dont pay interest. This sure sounds like a republican idea to nail middle class with huse taxes
You shouldn't be buying a house where you have to count on this deduction as part of a reduction in the price. You bought more than you could afford or more than you needed.
And in another post, as for the President's use of AirForceOne....go look at how much Bush used it before you complain!
And don't forget....this is something Romney wants to do...close loop holes!
The mortgage deduction has never been a factor in my tax bill. I don't have enough other deductions to make it worthwhile to figure this in, the standard deduction always comes out higher, the same with the medical deduction and most other of the deductions available. May as well do away with them and go with a straight flat tax.
YOu are DUMB!!! the single deduction is $495 a month....since the average mortgage is over $750 that would mean in order for someoen to NOT benefit their house would have to be over 50% paid off to NOT have about $500 of the payment be interest...and snce Obama has been forcing refinance on everyone they are probably refinanced now OR before the crash and all the equaity has been lost or taken out thus menaing since mortgages are FRONT LOADED wiht interest...most if not almost ALL mortages are repaying that interest thus substatiating the idea that $500 bucks is not much interest to attain per month.
Your an idiot
First, itemizing saves me more than the standard deduction every year and the mortgage interest deduction is a huge part of that.
Second, the tax deduction on mortgage interest was a MAJOR reason we purchased our home. I was getting killed at tax time while I rented.
Third, if this is true (or should we just blindly believe it since it is on the internet) then how about the folks who already own a home? I don't know how plugged in you are to the current market, but we're getting killed out here... and you want to make that worse?
You are an idiot.
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