Another fun aspect of the mortgage interest deduction cap: lower house prices

[unblock]

Not only will affected homeowners lose some of their mortgage interest deduction*, but this fact also causes their house to lose value as would-be buyers will also lose that deduction, making the house less affordable at the same price. So prices fell to compensate.

Personally, I've always had mixed feelings about the mortgage interest deduction, as it's largely served its purpose. In theory, I don't mind it being phased out entirely. But I certainly object to it being curtailed in order to give the extra tax dollars to the filthy rich....


*yes, I know current mortgages are grandfathered in, but that only works while it's outstanding. It means you can switch houses or even refinance without losing it.

[AJT]

1. So more people with under water mortgages?

[unblock]

2. Yup! A decade to recover from the financial crisis and boom! Along comes Donnie!

[Xolodno]

3. Know people in Real Estate/Mortgage industry...

...the kind that say "oh, I'm independent, I don't favor one party over the other"....then spout right wing talking points, read/listen to right wing news....vote right wing ,etc.

Many times heard from them, "Trump is a Real Estate guy, so he understands us and won't screw us over"

Imbeciles...your his competitor's. He want's lower Real Estate prices, rent the place out...and after he runs it to the ground, flip it on the next peak cycle. He doesn't give a shit if your commissions and thereby your income tanks.

[mythology]

4. The cap is annoying, but I think the bigger issue is the standard deduction almost doubling

means that far fewer people will be able to use the mortgage interest deduction. It keeps the policy in place, but makes it far less likely that it will be used. It's just a slight of hand to keep it in place.

Fortunately I don't think the plan can pass. It's already unpopular and it's not like it has a built in constituency.

[former9thward]

5. So you want people to pay more taxes?

The standard deduction doubling is a good thing. It will mean people save money. That is why "far fewer people will be able to use the mortgage interest deduction". Which is a weird way of putting it. It means that far fewer people will want to use the mortgage deduction because they can save money by using the standard deduction.

[NutmegYankee]

9. Not exactly. The personal exemptions were phased out.

So a single parent with children will lose out and pay higher tax. Also losing out are singles in in high tax high income states like myself who need the state income tax to itemize. Since I lose that, I now have to take the standard deduction and pay about $1000 more in taxes.

[customerserviceguy]

6. The cap

is half a million dollars. That covers most all middle class housing in the United States, as far as I know.

Getting rid of the second home mortgage interest deduction is something that is long overdue. I wish they'd kill the charitable contribution deduction. Sure, a lot of the money goes to worthy causes, but a whole lot more goes into churches that do nothing productive with the money, in as far as helping needy people is concerned.

The itemized deductions thing has been dying the death of a thousand cuts since the days I did taxes for people in the 1980's.

[unblock]

7. Like I said, mixed feelings.

If phasing out the home mortgage deduction were part of a democratic proposal to make the entire tax burden more progressive, I'd be fine with it.

But restricting it in order to give yet more money to the super rich is just nuts.

As for the cap being a lot, yes, in most places, though not so much in a few crazy real estate markets. But the cap will effectively ratchet down over time with inflation if not explicit lowerings.

[customerserviceguy]

8. The various tax breaks

for residential real estate have driven up the prices, making for various bubbles that inflate and are popped. Using the tax laws to make economic policy produces artificial winners and losers. Get rid of the mortgage interest deduction, and you will see prices level off, and probably interest rates, too.

I do concur with you on tax breaks for the rich, but they're the ones most liable to take advantage of the freakish breaks. Under present law, a married couple can shield up to $2.5 million dollars of income every ten years from buying and selling principal residences every two years. Nobody I know can afford housing that appreciates $500K or more in two years, so this break primarily benefits the well-off.