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?
More from Bargaineering and MSN Money
- How to save money on moving
- Don't play the lottery
- Calculating cost of living: Where you live matters
- Calculator: How much house can you afford?
- 4 tax breaks for homeowners
- What's your real tax rate?
I am 70 years old. Work fulltime, make about $40,000. The main reason we are buying is for the MID. Kill the MID, we will sell and go rent and let the landlord fix stuff that breaks, pay the insurance and taxes, mow the yard and do the landscaping. We will just eat and sleep there and leave everything to someone else. How many millions will take that route? And there goes the housing market .. forever! The time rquired to get all those vacant homes occupied will take decades and housing values will collapse further. We should leave MID alone or we will see more unintended consequences.
Ps: I am a real estate broker
doing away with the deduction will mark the offical end and death knell of the American Dream. Home ownership is part of that dream. As is a good job paying enough to support your family, but that's another story.
Why would I buy a home instead of renting? Hmmm. Two reasons, One is maybe the investment will increase in value. Hmmm, not in today's world. The other is the old view that renting was just throwing money away. Really? As a renter, I'm not responsible for cost of maintenance and repairs to the property. Granted, if I'm rough on the property as a renter, I'll have to pay for repairs, but the day-to-day problems with major appliances, water heaters, furnaces, roofs, exterior painting and the like is the responsibility of the property owner.
So go ahead, do away with the deduction and watch an already stagnant housing market become a total disaster.
Take away the tax deduction and you will have plenty of empty houses...LOL! I know I would certainly walk away from mine. If you can change the rules and take away the deduction, I can change the rules and not pay my mortgage.
Bad enough Im punished for not breeding incesantly or going on welfare...I will not be punished any more!
How about the Govt starts worrying about how much it spends rather than on taking more of my income?
Egypt gets $1.5Billion from us and then attacks our embassy? No more soup for you!
Go ahead and kill the Mortgage Deduction. It will be the death of the Housing market. It is the worst in over 20 years. I have several houses and I will pay them off or sell them when and if the Economy ever recovers.
People in Washington DC have gone completely crazy or they are complete idiots.
My vote is on the later.
MSN will print anything and it shows with this article. Thinking that this is good news material.
Anybody that like this idea of getting rid of MID has no common sense and no idea of what or how Simple Economics or Simple Math really works.
And they probably balance their checkbook/money like the US government.
The US government does is so well.
Absolutely NOT!!! I do not agree with you. Every reason you quoted for doing away with the home interest deduction where the reasons I purchased a house a year and a half ago. I am a single woman with above average earnings, and my tax deduction for owning my home is over $10,000.00 a year. This is a far cry from the $5950.00 deduction you seem to be so proud of. If there are no tax advantages to owning a home, why wouldn't everyone just RENT and let the owner worry about maintenance etc. Your idea would really put this country into a tailspin!
Copyright © 2014 Microsoft. All rights reserved.
ABOUT SMART SPENDING
LATEST BLOG POSTS
VIDEO ON MSN MONEY
BLOGS WE LIKE
MUST-SEE ON MSN
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'