A serious discussion: How many homeowners do we have here?

[CatWoman]

The GOP are now going after homeowners, and will try to eliminate tax deductions for interest on home mortgages and health insurance premiums.

Your thoughts?

[gollygee]

1. ACK !

That would be very hard for us to afford.

[CatWoman]

2. I think I would just unload mine

and go back to renting.

I mean -- where's the incentive?

[Caution]

7. Building equity rather than dumping cash into someone else's pocket?

Even though early on in your mortgage you are paying mostly interest, you are still building equity and this increases as the time spent paying off the mortgage increases. After 30 years you own the house outright (assuming no home equity loans were taken). You can then choose to sell the house (hopefully at a profit though this largely depends on the housing market at the time of sale) and buy a smaller, cheaper home in another place if you like and have a bundle of cash to have fun with, or you can just enjoy having your monthly expenses dwindle to a small fraction of what they would be if you had to pay housing costs above and beyond insurance and property taxes.

Obviously this deduction helps a lot and should be left in place but it is far from the sole, let alone most important reason to buy rather than rent!

[CatWoman]

now I see why your name is "Caution"

:D

[Caution]

13. Nailed it in one!

[Lars39]

10. Rents will go up to offset losing the tax break.

[CatWoman]

11. hadn't thought of that

hmmmmmmmm...........

[malta blue]

3. I had not heard this...

I am a homeowner, and if they go through with this, then what is the point. I may as well rent and avoid all those homeowner headaches.

[tallahasseedem]

4. I had not heard of this....

just another way to keep the middle class down. I depend on that deduction to substantially reduce my tax burden.

[Mayberry Machiavelli]

5. But at least we eliminated the "death tax" on 3 million dollar estates! We

wouldn't want to hurt the poor farmer or "small" businessman now! :sarcasm:

[Orsino]

6. Of course they will.

I don't really qualify as wealthy--therefore they're going to continue to find ways to take from me in order to finance their giveaways to their real constituencies.

If not this way, then some other way.

[Mayberry Machiavelli]

8. Here's a link, preliminary stuff...

http://www.msnbc.msn.com/id/3626796/

Wednesday, October 12, 2005 | 9:25 a.m. ET
From Elizabeth Wilner, Mark Murray, Huma Zaida and Ryann Gastwirth

First glance
The drama in Washington today centers on efforts to get to the bottom of conversations, and the ultimate result of one such effort may be the indictment of one or more Bush Administration officials, which would be a big deal. But don't lose sight of something that might be of greater immediate interest to the public: the fact that President Bush's tax reform panel, which is expected to send him its recommendations by November 1, is proposing to scale back two of the nation's most popular tax breaks, for home mortgage interest and employer-paid health insurance.

The panel is proposing the rollback as a way to compensate for its also-proposed elimination of the alternative minimum tax, which is affecting more and more middle-class taxpayers every year and is in serious need of fixing. Still, as one Washington-based economic analyst points out to First Read, while this may be good policy, it won't play well in town halls. Unless these recommendations somehow go away between now and November 1, tax reform may not look so much like the savior of the GOP domestic agenda.

[bif]

9. Our house is almost paid off and

we're thinking of taking out a loan against it just so we'll have a write-off. And here I was looking forward to paying off the debt!

[Caution]

14. Do *NOT* do this!

You get a deduction from your taxes based on interest paid. You are basically saying "I'm going to take out a loan and pay $20 in interest just so I can get $5 of it back in a tax check" (the numbers are illustrative only).

This makes ZERO sense. Pay that home off and enjoy the extra money every month without paying a bunch of interest to a bank for no reason whatsoever.

[DancingBear]

38. Sorry - I must disagree

If you are a savvy investor, and you can make that money work and generate income IN EXCESS of the percentage rate of the loan you have, it's a no-brainer.

You'll be making money, plus getting a deduction.

It's a rather tried and true methodology amongst many in the financial industry.

[Caution]

43. The key part of this being "savvy" investor

How many out there are actually savvy investors? Additionally, wouldnt the savvy investor do quite well to take the money that would normally go towards a mortgage payment and put it into some form of investment anyways rather than also pay interest on top of the equity loan taken out of the home? Certainly an investor can make the equity loan work for them simply due to the larger initial investment stake as long as that investor was careful to diversify in order to minimize risk. This still assumes that the person is able to make the money work for him/her. Take a look at the major indices over the past 5 years, there has been little to no growth in the market as a whole since Bush took office, leaving me with 5 years of interest payments and a large portion of my home equity tied up in stagnant investments.

Can people make this work for them? Sure, but right now most HELOC loans are variable interest rate with the current percentage on most loans sitting at about 7% and climbing. For this to be worthwhile you need to be making more than 5% at a minimum (factoring in the interest deduction from your taxes). The S&P 500 Index has until recently averaged about 11% annually. In the past 5 years, that number is -11%

Are you really going to tell me the average investor does better than the S&P 500 over a 5 year period?

I'm sorry but I still disagree with the idea of taking a loan on a paid for primary dwelling as a means for investment. If this were a rental property or a second home, sure no problem, but a paid for primary dwelling is a lock on a significantly more secure future.

[DancingBear]

45. Let me flesh this out a bit -and answer a few of your questions

First off, a caveat - I am not a financial professional, but my wife is. She has been a CFP for 30+ years, so if I veer into an area that I am not totally comfortable with i will defer to her - I'm not waffling, I'm just being cautious. :) The last thing I want to do is to be giving out spurious info over the internet.

"wouldn't the savvy investor do quite well to take the money that would normally go towards a mortgage payment and put it into some form of investment anyways rather than also pay interest on top of the equity loan taken out of the home?"

Depends on their income level. Many folks take out mortgages just to use the deductions to offset income.

"Take a look at the major indices over the past 5 years, there has been little to no growth in the market as a whole since Bush took office, leaving me with 5 years of interest payments and a large portion of my home equity tied up in stagnant investments"

Again, this depends on how a portfolio is structured. I do know that many of my wife's clients have done quite well, despite the clown in The Oval Office. If you have a very good financial planner then he/she takes this into account when structuring the investment vehicle, as well as formulating the plan that best suits your long-term goals.

"but right now most HELOC loans are variable interest rate with the current percentage on most loans sitting at about 7% and climbing'

Don't know about that loan, but the rates where we are (Virginia) are nowhere near 7%, and the loan periods can (and do) stretch to 40 years.

"Are you really going to tell me the average investor does better than the S&P 500 over a 5 year period?"

Depends who is riding shotgun on your investments. :)

[MN ChimpH8R]

12. I'd be dead if this passes

The only reason I can afford a home (which I can't afford the maintenance for on my current - and unlikely to ever change - salary) is with the interest credit. I'd have to sell if this goes through.

The 'puke base is NOT going to be happy with this one, but it's just another * step towards reducing the vast majority of the population to peasantry. Nice to know that Paris Hilton will get a big tax cut, though. :sarcasm:

[billyskank]

15. My government already did that

Repealed mortgage interest payment tax relief. I think it was called MIRAS. This was before I ever owned a home. :(

[CatWoman]

16. which govt. is that, Billyskank?

[billyskank]

19. U.K.

n/t

[bif]

28. Didn't they do this in Canada too?

[nini]

17. those fuckers

again the middle class gets nailed. I will not be able to ever move again with this AND Prop 13 in Calif that will make the property taxes astronomical.

:nuke:

[William Bloode]

18. I own a small bungalow type house.

I have had it paid off for sometime. We could use a bigger house since just having a new baby a few months back. Due to so much stuff like this happening i reckon we'll just have to make due.

[flamingyouth]

20. My thoughts? I think they're a bunch of assholes.

However, that's not new. :D

Glad they're the party of "tax cuts." :eyes:

[nutsnberries]

25. those are my thoughts too and

nothing shocks me anymore, it just figures.

[MissB]

21. I own.

It would suck to lose that tax deduction.

It would make some sense to limit the tax deduction to a "reasonable" level each year. You know- target the uber-wealthy by limiting the tax deduction to 20k or so.

But shit. This is Bush we're talking about. We know that if this makes it through, it'll mean the middle class takes the brunt of it. Pop goes the bubble and all that.

[RebelOne]

22. Fortunately, I don't have to worry.

I own a mobile home which is paid in full. The only monthly payment I have is $300 for lot rent.

[El Fuego]

23. Me

If they try to do this, they will PAY dearly.

[AirmensMom]

24. We only have 24 more payments left.

So it won't hurt us as much as it will hurt others. As it is now, our interest payments are pretty low. I feel bad for people who are just starting out on their mortgage.

It makes me sick that the GOP is doing this. For all their pious holier-than-thou talk, they're evil to the core. :grr: :mad:

[tallahasseedem]

26. I cruised over to the Freeper board....

to see what they had to say. The majority were not happy and said that it guaranteed that the Dems win in 2006 and 2008, so let 'em try. It will never happen. If they think the backlash against Social Security was bad, just wait when they try this.

[cally]

27. The proposal is to put a $300,000 limit

on the mortgage interest tax deduction. Basically, this will screw homeowners in big cities and the coastal states. The average price of a home is $220,000 but in the SF Bay Area the average is over $500,000. Anyone buying in all but very rural areas of California would be badly hurt.

The bigger issue is what will happen to the overall economy. This would immediately devalue homes in these real estate markets and would set off a devaluation in the housing market nationwide. Since most of the middle class have their homes as the number one investment, most of the middle class would lose their major savings. This could and probably would increase bankruptcies and cause a major recession. The housing boom has propped up the economy the last few years.

In theory, I'm not completely against re-evaluating the mortgage interest deduction. Some of the deductions on second homes, boats, and mega-houses do not make economic sense in the long term. Any change will drastically impact the US econonomy and impact those in expensive real estate markets. Many in my area are not rich but are able to invest in expensive houses due to previous gains in the real estate markets.

[Momgonepostal]

32. Now THAT sounds like something they would do

It would keep the rural red staters happy and piss off the urban blue staters. Sounds like something the Bush administration would love to do.

I'm in a cheap part of CA and the average home price is still over $300K.

[bertha katzenengel]

50. "set off a devaluation in the housing market nationwide" -- that's damned

scary. I don't know anything about economics, but I do know that nothing good can come if this plan is implemented.

[Taverner]

29. Typical.

The GOP has no goal other than destroying the middle class.

[Taverner]

30. BTW...do you h ave a link?

[CatWoman]

35. here ya go

http://www.msnbc.msn.com/id/3626796/

[Patiod]

31. Around here, GOP is whining that apt. folks don't pay their share

which is probably true, but most of us don't have kids, and we're not exactly high-income types trying to escape the taxman by cleverly hiding out in apartments.

[Momgonepostal]

33. That's crazy.

Renters pay property taxes and school taxes too, just indirectly. Do they think your landlords are not passing those costs on to you?

[abbeyco]

34. I just purchased mine a year ago

I've been cringing ever since I heard this being floated.

Frankly, it makes me want to puke if it actually comes to pass. However, I think that as word of this action comes to the top of MSM news, there will be a revolt. The only people I know that own their homes outright and don't count on this are people like my Mom who've lived in the same house for 40-some years.

I could go along with this if it were an option for second and third homes, but not a primary residence. If you think about it, the real reason the uber-rich don't own their own homes outright is that there's a tax break for the mortgage interest. When you start looking at the interest on a jumbo loan not being tax deductible, most of the super-rich will have a shit fit. If they choose to cash out some holdings and make the purchase outright, they'll have a tax consequence. So, there are a lot of reasons that ending the tax deduction for home mortgage interest probably won't fly if it's for primary residences.

Just my thoughts on this....and I'll be one pissed off 'murkan if my deduction goes away.

[DancingBear]

36. There is not a prayer in hell that that would go through

None. Zero. Nada.

It's been tried before (as a "trial balloon") - it went nowhere.

The financial/banking communities would go bat shit crazy. I can tell you how some of the financial community would react, and it ain't pretty.

The moran's job approval rating would hit single digits.

It's just not going to happen.

(but that doesn't mean the dumb shit won't try)

[maine_raptor]

40. I agree

Home interest deduction removal would be the straw that breaks the GOP's back.

I don't think this will fly simply because any politician with half a brain cell would know that it is hotter than any third rail. But lacking that key part (the aforementioned 1/2 brain cell), Shrubby may just try it.

If so, we may find out if the polls can handle negative numbers.

[bearfan454]

37. What ? !

I hadn't heard that CatWoman.

[Mayberry Machiavelli]

39. More here:

http://www.latimes.com/business/la-fi-tax12oct12,0,5995816.story?coll=la-home-headlines

Panel Supports Cut in Mortgage Deduction
The amount of a home loan qualifying for a federal tax break could be reduced considerably.
By Joel Havemann
Times Staff Writer

October 12, 2005

WASHINGTON — President Bush's tax reform commission tentatively agreed Tuesday to recommend a substantial reduction in the limit on mortgage interest that homeowners can deduct from their taxes.

...


Making that task more difficult is the panel's determination to abolish the alternative minimum tax, a provision that was designed to prevent a handful of the wealthiest taxpayers from sheltering most of their income. Since its creation in 1969, the tax, which disallows many deductions and credits, has snared increasing numbers of middle-class taxpayers as their incomes have risen with inflation.

Eliminating the alternative minimum tax, the panel estimates, would cost the government about $1.2 trillion in revenue over 10 years. The panel offered no estimate of the revenue to be gained by scaling back the mortgage deduction, but according to the White House, abolishing it outright would fall somewhat short of $1.2 trillion.

...

At a time when the National Assn. of Realtors estimates the median home price at $268,000, the $1-million maximum on mortgages whose entire interest costs are deductible affects relatively few home buyers nationwide. The story is different in California, where the median is $569,000, according to the California Assn. of Realtors.
...

[bertha katzenengel]

41. I'd shit a brick if I lost my deductions. That said, I honestly don't know

the genesis of that deduction. Does anyone know the history?

I do understand the deduction for health insurance premiums, but I don't pay enough to qualify.

[Zomby Woof]

42. I read in the LA Times

That the main targets for this elimination are home equity loans and second home mortgages, not primary homes and the regular mortgage.

Home equity interest deductions already have to meet certain tests, so that would the be the only change to even remotely affect the middle class.

So I am holding my fire as of yet. And as for medical... well, that one is difficult to get at all, so will affect far fewer people (whatever amount of premiums exceed 7.5% of AGI is the current deductibility rate for itemizers).

[Mayberry Machiavelli]

44. Read my (LA Times) post 39 above. Primary target they are looking

at is regular mortgage, what you said may have been an earlier consideration but it looks like they've moved off that. Nothing final... YET.

[Zomby Woof]

48. Is it a new story?

I base mine on an article from a week or so ago. Iwouldn'tbe surprised if they changed it, though.

Fuck them. They are going to drive everything into the ground. :nuke:

[Mayberry Machiavelli]

49. It's from today. Link and excerpt in post 39.

[Zomby Woof]

52. Fucking shitholes

Ok, I am ready to fire.

[GOPisEvil]

46. If they do that, what's the advantage of the "ownership society"?

I'm not sure I'm cut out for home ownership anyway, it would make getting rid of this place an easier decision in some ways, but who'd buy it? An investor, maybe.

[WeRQ4U]

47. They made a list of the dumbest things to do and check them off as they go

That being said, it probably won't happen. Political suicide for anyone near it. Bankers would have a shit fit. It's one of the best mortgage "selling points".

[Mayberry Machiavelli]

51. It's not "dumb" from their point of view. Primary goal from their point

of view is to eliminate the AMT to again help their true constituency. This costs a trillion. They're just trying to make up that trillion somewhere else. (read article linked in post 39)

I'm thinking about this now... You might think that there's a lot more people (voters) that have mortgages over 350K than pay the AMT... But that's not so much of a concern, when:

1) You control the voting machines
2) The voters with the 500K mortgages are already in coastal, BLUE states. Florida being a notable and important exception, I suppose... but then refer back to 1).

[WeRQ4U]

54. You make good points, but you forget something...

The reprecussions won't be felt just by those heading the party, but also by those state and local officials who are associated with it. Believe me, it's not something any borderline republican senator wants to include in his next election race, and it would be GREAT fodder for any up and coming Democratic opponent to hammer on. ANd I'm pretty sure that SOME republicans still feel the need to appease their state voters and don't rely upon the voting machine fraud as a failsafe fallback.

Besides, not ALL of the Republicans who would be associate with this bill would benefit from it. Not ALL of them are filthy rich....yet.

[Capn Sunshine]

53. Here, here

It would be political suicide. Worst idea EVER.

Imagine of you will, 90% of middle america faced with a tax bill some 5,000 dollars in excess of any bill in the past. Do you think this would focus the argument on where the breaks are?

Do they want to have that conversation? No way.

[Mayberry Machiavelli]

55. One possibility is that they are realizing that one way or another, they

are OUT in 2006 and 2008, and they're going to LET IT ALL HANG OUT in the meantime, grab as much out of the cookie jar as they can while their fists are in it.

Sadly, I doubt this. I don't really see this bunch having any intention of relinquishing power until the torch wielding mob is at the door.