The Votes Are In: Eliminate the mortgage interest deduction
GD Star Rating
loading...
loading...
GD Star Rating
loading...
loading...
In a recent first tuesday poll, 66% of readers (533) believed the mortgage interest tax deduction (MITD) should be eliminated from the U.S. Tax Code since the MITD:
- only rewards those who purchase a home with a mortgage, and leaves those who pay with cash and renters out of the incentive; and
- serves the interests of lenders who want people to purchase homes with a mortgage, but does little to benefit the long-term solvency of the homeowner.
End of free preview
The rest of this content is only available to first tuesday Members. If you are a current first tuesday Member, please login above.
Not a current Member? For only $29.50, our Annual Membership includes access to:- the first tuesday journal;
- over 350 first tuesday real estate forms;
- over 35 FARM letters; and
- a 16-book reference library and more!
To sign up, visit firsttuesday.us!
GD Star Rating
loading...GD Star Rating
loading...About The Author
ft Editorial Staff
is the writing staff comprised of legal editor Fred Crane, In-House Broker Consultant Fernando Nunez and writer-editors Connor P. Wallmark, Giang Hoang-Burdette, Jeffery Marino, Carrie B. Reyes, Sarah Cantino, Matthew Taylor and Matthew Shade.
Latest CommentsLeave a Reply
I don’t get how 66% of people believe that we should pay taxes on the interest we pay our lenders, as well as have the lender’s pay taxes on that very same dollar. As a real estate professional, this would not only hurt the mortagees, but renters and homeowners who own there homes alike. The fact that this is even a debate is astounding as you look at a fickle real estate market you take away the only benefit for new homebuyers there is. What do you think would happen to the real estate market? I’ll tell you, less buyers, more inventory until rental prices achieve what a typical 80% PITI mortgage would be. Is the main argument that it is not fair to non-leveraged homeowners and renters? That is like sinking another guys boat because you don’t have one. Good luck people, this is just the beginning of the end if the 66% has their way.
loading...
Btw… Please exclude me from further newsletters, from the tone of the “editorial staff” it seems that they are proud of this. The ignorance is astounding and I want no part of it.
loading...
DIS ALLOW CHARGING MORTGAGE INTEREST!!!!!
In other countries , charging interest is forbidden by law!!!! Maybe we should wake up.
Americans (ME) are starting to find out. The federal reserve took 14 trillion and sent it to themselves, You cant pay your bills because our govt gave 14 trillion to banks overseas at ZERO interest. google search fed res audit 2011 $50,000 for every US Citizen was stolen and called TARP/ read about it. SMILES I want my $50K
loading...
Forget about the deductions etc. The income tax should be eliminated. It is absolutely idiotic to tax the rewards of work. A national sales tax will or a vat will collect a fair share sufficient to fund the govt. And it will collect taxes on the underground wage earners that never have paid their fair share.
loading...
Could it be that those who may have lost their own home are more pre-disposed to vote, or to conduct the poll? Or are we to believe that real estate agents (the presumed clientele of the First Tuesday Firm) think the elimination of the mortgage interest deduction will HELP stabilize prices and business??
Whatever the merits of the mortgage deduction, the more immediate question is what are the merits of this poll?? Well…..it may be a great measure of the anger out there.
So let’s cut with the sour grapes and self-sabotage and get on with or out of the business of real estate SALES! This is still a sales business. Let’s be helpful, honest and make the sales that can happen happen.
loading...
Considering over half the voters were probably renters, I’ll bet none of those poled were informed that the amount of money the investor looses to taxation would be added to their rent. Inform them of the amount of $ that their rent would increase each year then watch them squawk and change their vote. This pole doesn’t tell the real story.
loading...
Ahhh, I love the indignation of those like Dann whose only interests are self-serving. Didn’t mention though that he thinks taxes should be eliminated on ANY type interest paid, just the one that effects his livelihood. Also of note is the attempt to frame it under only certain market conditions, i.e. a weak market of the type we’re in now. This is the same type of argument that has been used in recent years in efforts to legalize marijuana in California, to legalize or expand localized gambling in California, Florida and elsewhere and most recently, the talk of “legalizing” illegal immigrants by having them pay a hefty fine of 1000′s of dollars to move to the head of the line – let’s just legalize everything and create long term problems that are entirely unrelated to the problem we have of overspending, not undertaxation.
And to the minority of voters against repealing the MITD who claim that it “is responsible for helping families achieve the American Dream.”, I would remind them and like-minded thinkers that the tax system is to pay for the goods, products and services, not a system of rewards and punishments.
I believe MITD should be eliminated over a short period of time or drastically scaled back. I rent because I want to take weekend trips here and there, generaly do nothing except rest or to play golf, not clean gutters, paint the fence or mow the lawn.
loading...
I once believed that the mortage deduction was an obsolutely necessary to owning a home. Now I think it would be the perfect time to eliminate it. Think about it this way. I now believe it was the belief that the tax savings was helping the homeowner when in fact it was only allowing them to pay more for a home then it was worth. If the tax deduction is eliminated then the price of homes will come down (more then they are now) to a level that is affordable without a deduction. The banks love that we buy expensive properties as it is more money they make…it is time the banksters get kicked to the door.
loading...
Finally someone who is against it comes forth and guess what… They are renters…. Vince, your example of using the market conditions to warrant legalization of marijuana, gambling, and illegal immigrants to equate to MITD issue as weak and not well thought out. The MITD has been in effect for over a century and for good reason. I think all interest paid should be deductible as there is already tax being paid on it from the one receiving the interest. To implement this, especially at this time, would be catastrophic. It is ironic that all the supporters look at it as a system of rewards rather than a system of encouragement. Do you not see the economy in free fall? Do you not recognize that these BIG BAD EVIL banks are still closing their doors? Do you not see all the for sale signs in your neighborhood and the news of an impending double dip? Implement this plan of yours and take the small pool of buyers that can actually qualify for housing and cut it to a third. Not only because their “incentive” is gone, but also because the affordability is gone as well. Take your rent Vince and raise it 15-25% a year to compensate for the extra costs of owning a building. Your green fees Vince will also increase, because the cost of owning a Golf Course will also go up. Wake up people, get off the Kool Aid and do a little thinking. As for you CF, if you think our economy can handle another 30-40% drop in home prices then you don’t even deserve a response. If we handled our spending as a country then we wouldn’t have to worry about where we can squeeze out the extra dollar. It started with the rich, now it is middle class, who will be left to pick on? The impoverished will see their benefits dwindle and guess what will happen then. Utter chaos. Look at the big picture, educate yourself, think past tomorrow to how this will effect our country as a whole. I know I am wasting my breath, but it seems that you get the basics and are confusing the issues. Either that or you are like the rest of the world who feel ignorance is bliss… And doing nothing but resting on your couch and golfing, I can see why. But if you have your way, it will come knocking at your door and by then it will be far too late. Good luck.
loading...
Terry and I seem to agree in general, but I also think his logic was not quite right, respectfully. The law requires landlords to declare rent income, and allows the deduction of rental expenses including mortgage interest. This would NOT CHANGE even if the MITD (mortgage interest deduction) were eliminated for owner occupied single family homes.
I’m not even sure that home prices would fall that much if it were eliminated. Prices are already down so much that I think the greater impediment to ownership now is the availability of loans. Rates are great, but on one can qualify.
My dad used to say that the UNemployment rate was either 0% or 100%, for any one person. You either had a job or you didn’t. In a similar way, I think people who have a home, or hope to have one someday, probably have a reason to support the mortgage interest deduction. Those who have temporarily or permanently given up on ever being able to own a home have reasonable grounds to ask – “what’s in it for me?”
So I think the gov’t should force banks to lend on their own shadow inventory (the homes they are stuck with) if the borrower can put a down payment together. The worst that can happen is that the bank gets back a home thay already own, and keeps the down payment. If this policy were implemented, I think support and hope would increase.
loading...
Rob I agree with you on almost your entire post, with the sole exception of your belief that home prices would not be affected. You take areas where the cost of a mortgage equals or exceeds the cost of rent, where is the benefit? All the maintenance, taxes, and insurance would be added to that monthly cost without the upside. No one in the market at this point is buying expecting appreciation. So you would have to cut the current pool of buyer to AT LEAST half of what it is currently and that would force a already weak market into another 30-40% drop in values, which our market clearly cannot afford. The other issue with this, is that the banks would have to completely overhaul their underwriting guidelines, likely looking to net-income for DTI ratios, instead of the current method of Gross. This would further knock down buyers price range and ultimately affecting home prices again. Whether or not people feel that MITD should be eliminated, the fact that they are even having a conversation about it now, is true lunacy. If there was a time to do it, it was in 03-04 where we could have used a hit to the market. Not now…Definitely not now.
loading...
I think Dan takes it the rest of the way to the endzone. So maybe ‘it’ would make houses more “affordable”. But as soon as the new buyer does the numbers and realizes that (s)he too will NOT be deducting interest, is there really a benefit?
Since 2/3 of Americans are still homeowners (strange but true), the repeal of the home mortgage interest deduction probably won’t happen. But uncertainty about it , and about the possibility of the above commented Dan Effect (falling prices) is YET another reason why people may delay buying, extend the recession, and possibly miss the chance to buy.
I don’t dare guess which way prices are headed in the near term, but after the election, interest rates could rise as fears about the deficit and American credit return. If interest rates rise to 7% someday, your payment on a home purchased then will be almost double, even if the price of house stays the same as it is now.
And please don’t get an adjustment loan, for obvious reasons. Instead, go to Trader Joe’s, look at the 20% rise in the last 6 months on stuff I like, check out the gas price rise even in a recession, and realize that inflation will return with a vengeance, even though it never really left. Your rent will RISE. And RISE. And never end.
Use a realtor you trust, buy a bargain, save every month over renting the same house, pay it off, live free in old age, maybe reverse mortgage for extra cash then. Do not buy for near term appreciation. Although your eventual gain will be tax-free largely. And don’t forget to declare your mortgage interest and property taxes.
Use this disgusting crisis to begin or begin anew your secure life plan. Sometime in the next few months or years, move from renting to owning. I’ve seen three downturns. There won’t be any better longterm tool than your home at these prices. Flowers to First Tuesday for an alternative forum.
loading...
Pardon me. It’s Dann above, not Dan.
loading...
Renters get many benefits out of living in a rented premises. Renters get police protection; fire protection; and many municipal services. If renters have kids, they get free schooling for their kids. These benefits alone most likely more than cover the rents the tenants pay. Property owners pay property taxes and mortgage interests and maintain the property in order to provide housing for the tenants. It is just fair that property owners get a break somewhere such as mortgage interest deductions. These are some of the reasons in addition to the obvious and noted incentives to own and provide rental housings and other good reasons to keep MITD in place.
loading...
I’m moving on now. Thanks to y’all for this discussion.
loading...
Well said Rob (and thanks for the name correction)! Good point Alex!
loading...