There's a big fight brewing over the mortgage-interest tax deduction

[Yo_Mama_Been_Loggin]

tax-reform proposal by House Republicans that would make the mortgage-interest deduction moot for most Americans is starting to set off alarm bells across the housing, lending and real estate industries.

The right to take a deduction for interest paid on your mortgage has always been a political third rail, and the reforms introduced last June would not directly eliminate the write-off.

Instead, the Better Way tax-reform “Blueprint” of Speaker Paul Ryan and his cohorts would make the deduction irrelevant for about 95 percent of homeowners. By “doubling the standard deduction that taxpayers receive…most people would have no need to take the mortgage interest deduction,” according to National Mortgage News.

The specific language in the Better Way says: “This Blueprint will preserve a mortgage interest deduction for homeowners. …For those taxpayers who continue to itemize deductions, no existing mortgage will be affected by any changes in the tax code. Similarly, no changes will affect re-financings of existing mortgages. But just as importantly, because of the other provisions included in the new tax system, far fewer taxpayers will choose to itemize deductions, with the vast majority of taxpayers finding they are better off by taking advantage of the larger, simpler standard deduction instead.” 

https://www.msn.com/en-us/money/taxes/theres-a-big-fight-brewing-over-the-mortgage-interest-tax-deduction/ar-AAlEvds?li=BBnbfcN&ocid=edgsp

[bettyellen]

1. It won't reduce their deduction, right? It'll just give a bigger deduction to others....

So I'm not sure why homeowners should be mad, except that they no longer have an advantage over renters- so they feel bad while paying the same?

[roamer65]

2. Actually...this would help lower income folks.

A larger standard deduction would be a tax cut at the lower end of the income bracket.

I would like to see the final bill...but I may be in favor of it.

[TeamPooka]

5. The white folks that voted for Trump don't want to help poor black folks. They want an advantage

they want more than the others get
Not the same, even if it's better for them.

[tritsofme]

3. At first blush, I'm not sure this is bad policy.

Skeptical because Ryan is pushing it, but it seems like this would simplify taxes considerably for many.

[HassleCat]

4. If it's a wash, they wouldn't bother.

Somebody wins and somebody loses, we can be sure. One obvious winner is people who own their homes, with no motgage. They get a free boost in the standard deduction. Working class families might lose because their gross income is already low enough that the greater standard deduction isn't as good as the motgage interest deduction. And there is the probability that some "fine print" in the legislation will make it a bad deal for working class families.

[Nwgirl503]

6. I'm so jaded right now I can't help but side-eye any repub driven ideas

[Cosmocat]

13. As you should

Their radicalized ideology is surpassed only by their stupidity.

[onenote]

8. That's not what the description says

[HassleCat]

26. Never trust the come-on.

They never describe it the way it turns out.

[Skidmore]

7. It's the one deduction

we have left to us.

[onenote]

9. We have the charitable contributions deduction

And the deduction for certain taxes

[jmowreader]

23. You have that many charitable contributions?

The 2016 standard deduction:

Single, Married Filing Separately: $6,300

Married Filing Jointly, Qualifying Surviving Spouse: $12,600

(I had to look: If you have at least one child, you can use the Married Filing Jointly standard deduction for two years after your spouse dies.)

Head of Household: $9,300

This is what you are allowed to deduct:

Medical and Dental Expenses not reimbursed or paid by others, minus 10 percent of your adjusted gross income (AGI)

Taxes you paid: your choice of state income tax or state sales tax, plus real estate taxes, personal property taxes, and "other" taxes

Mortgage costs: home mortgage interest, points paid, mortgage insurance premiums, investment interest

Gifts to charity

Casualty and theft losses

Job expenses and miscellaneous deductions: unreimbursed employee expenses, tax preparation fees, and "other" expenses, minus two percent of your AGI

Then there's an "other miscellaneous deductions" from a list in the Schedule A booklet.

If you earn more than $155,650 there's a worksheet you need to complete to see whether you get to keep all of it.

Here's the problem: In order to have the level of spending needed to use Schedule A, you've got two choices: eat nothing but ramen and live in a darkened house because you can't afford electricity, or earn very close to that $155,650 statutory cutoff.

If General Secretary Trump wants to do something to help the Common Man (stop your laughing), he can quit fucking around with tax rates and allow people to use both the standard deduction and Schedule A if they earn under:

Single/Married Filing Separately: $50,001
Head of Household: $75,001
Married Filing Jointly/Qualified Surviving Spouse: $100,001

[pnwmom]

31. They have plans for eliminating that, too. n/t

[Mosby]

10. they can't double the standard deduction

Where is the tax revenue going to come from?

The whole thing is stupid.

[Cosmocat]

14. This - bait and switch

It ALWAYS is about the ultra rich.

Whatever Bullshit they come up with will be window dressing to slip in the massive cuts to the ultra rich.

[PoindexterOglethorpe]

11. Doubling the standard deduction?

That would benefit me, and probably a huge number of people.

I'm old enough to remember when we could deduct credit card interest, and while losing that deduction didn't hurt me at all, I knew people who were quite upset about it.

[HoneyBadger]

16. I am on a single mom group

And the proposed change in deduction is very very unpopular, because if your child no longer needs childcare, but is old enough that you get a head of household deduction, you lose at least a $2k deduction. For everyone else, particularly single renters with no kids, they make out like a bandit.

[PoindexterOglethorpe]

18. I'm feeling a bit puzzled, because if the standard deduction is doubled,

won't the single moms likewise benefit? Wouldn't the standard deduction for each child be doubled?

I'm a homeowner, and my accountant has warned me that pretty soon my mortgage interest rate deduction will be low enough that I won't be able to itemize. So if my standard deduction is doubled, hooray!

For what it's worth, I recall reading some very long time ago, probably in the 1980's, that the mortgage interest rate deduction had outlived its usefulness and should be eliminated. That deduction was largely responsible for the huge run-up in home prices, and that was at least two housing bubbles ago.

[HoneyBadger]

20. From Forbes, obviously there are plenty of variables

Does you kid's afterschool qualify as childcare, do you kid's piano lessons, do you have 6 kids.

.... would boost the standard deduction, he would eliminate personal and dependent exemptions, raising taxable income for all single parents who do not itemize. Under current law in 2017, a single parent with one child can take a $9,400 standard deduction and two $4,100 exemptions, thus reducing her taxable income by $17,600. Trump would replace that combination with a $15,150 standard deduction, making $2,450 more income subject to tax. And bigger families would get hit even harder—their taxable income under Trump’s plan would go up by $4,100 for each additional child, relative to current law.

[jmowreader]

24. You're not that old

The Nonmortgage Interest deduction was killed by Ronald Reagan in one of his eleven tax hikes on the middle class.

[treestar]

12. IMO the standard deduction should be increased to the figure

that it takes to maintain a person. All expenses of a business are written off. All expenses to feed, clothes and house a person ought to be written off. They could use the poverty level that the federal government figures.

[Cosmocat]

15. Do people forget 2000?

This WILL be about big tax cuts to the ultra rich and WILL fuck up the federal budget.

2000 these as asholes threw us suckers a one time 300 bread crumb to provide cover for the Bush tax cuts that blew up our balanced budget.

It is always. ALWAYS, A L W A Y S some Bullshit to scam us to give hand outs to the rich.

[rgbecker]

17. The mortgage interest tax deduction has always been about the rich.

It benefits those who can afford to buy a house, those banks that lend the money, the brokers that stick their fingers in the deal. House ownership has been around 60-70 percent for years and you can be sure it is not those in the lower incomes that are benefiting from the mortgage tax deduction. In fact many 2nd home owners are taking this deduction if they are not using the houses as rental, in which case the mortgage interest would be deducted on their Schedule E form.

This deduction does not benefit low income tenants either for the same reason. Landlords can and do deduct their mortgage interest expenses as business expense rather than on the Schedule A (Itemized deductions). The sooner this deduction is eliminated, the sooner the mortgage and real estate market will find a new equilibrium which reflects the lack of government intervention and the sooner these currently subsidized businesses start competing evenly with other enterprises.

I saying this as a guy who has worked construction for 30 years. The business does not need to subsidize the wealthy to thrive.

[PoindexterOglethorpe]

19. Not all homeowners are rich.

I'm a homeowner, but I'm not rich. However, my decision to purchase this home was not based on getting money back because of my interest rate deduction. If it went away, without any other change in the tax rates, I'd still be able to afford my mortgage.

[rgbecker]

21. For sure. But the deduction is benefiting the rich more than anyone.

If you are paying in the lower tax brackets because of your income, a deduction of $5000 or $6000 will net you 10% or $500 or $600. This might be on a loan of around $100,000. The more wealthy, higher income tax payer who borrows for a $500,000 house will likely be in the 25% tax bracket and will be getting a 25% break on his interest payments of 25,000 - 30,000 or $6,000 - $7,000. And it might be his 2nd home.. And it gets worse when you start looking into the "1%".

[PoindexterOglethorpe]

22. That's true, that it benefits the rich more,

but it absolutely does not follow that all homeowners are rich.

I do know people who made home-buying decisions based on the deduction, which I've never fully understood.

On the other hand, there are those who say no one should even consider retirement if they still have a house payment. While a nice sentiment, there are LOTS of reasons why an older person might still be paying on the house and go ahead and retire. Like me, for instance, since I bought my current place at age 60. I'm 68 now, and seven years into a 30 year mortgage. I wish I could have done a 15 year mortgage, but that simply was not possible. Meanwhile, I have some decent equity, and (what is most important to me) I can afford the monthly payment.

[muriel_volestrangler]

25. The red flag in the description is "*existing* mortgages"

I would assume that means that a mortgage on a different house, or one for someone who is buying their first house, will not be covered. If the standard deduction leaves you better off anyway, that won't matter to you. I would think it's large mortgages that would be better off using the mortgage deduction, so you may think this is a reasonable move even if it does stop future mortgages qualifying (and gradually weans the USA off mortgage deduction. FWIW, the UK did it in the 90s, in a series of small steps, and it turned out to be relatively pain-free to end it).

[still_one]

27. First sentence is misleading, "the mortgage-interest deduction would be moot for most Americans "

which could imply anything, then they say that it won't change anything for those who itemize deductions.

Doubling the standard deduction is NOT going to stop the majority of people from itemizing deductions, because the interest rates, and property taxes alone on those who qualify will be far greater than just the doubling of the standard deduction.

However, doubling the standard deduction will provide a greater benefit for those who do not have a mortgage, and make less income.

[Kang Colby]

28. I didn't read the article.

But did they say double the standard deduction? If that's true, hell, that would be great news for lots of people.

But Paul Ryan is a snake, so this needs to be looked at very carefully.

[Cosmocat]

29. God damn right

What did the Bush tax cuts do for the average Joe?

A 300 dollar bread crumb to toss at the masses as a cheap payoff to get big upper class cuts done.

[Xolodno]

30. Looking at the replies to this thread, and just about everyone is missing the point.

Its not about the deduction. This will put the breaks on the housing market and stifle any wealth gain someone in the middle class who owns a home might have. Sure they are putting more money in your pocket in the short term but fucking you over in the long by taking real estate investment away.

Corporate landlords will get hit to, but they still have plenty of other deductions to max out from. So they won't feel it.

The loss of loans will also force banks to invest elsewhere, where...I'm not sure. But you can bet your ass Ryan and Co. know exactly where.

A lot of realtors, loan officers, etc. will be out of work as well. And will probably flood other sales related jobs, thereby putting downward pressure on income in those fields.

The other insult, lets say you bought a house prior to the crash, but did the moral thing and still pay the mortgage despite not being up to the value you bought it. Now, you're waiting on inflation to catch up or you sell out when you've paid the difference of the value from the loan, netting you nothing.